How to spot a bad redundancy settlement agreement

sarah ryan
Sarah RyanAccount Manager @ Lawhive & Non-Practising Solicitor
Updated on 8th February 2024

What are the warning signs to look out for in a redundancy settlement agreement?

If you've been told by your employer that you are being made redundant then in the UK you will likely receive a settlement agreement (also known as a compromise agreement).

You need to get professional advice from an employment lawyer before signing the settlement, but there are a few red flags to look for that might give cause for concern straight away.

No offer of a reference

If your employer is not committing to providing a favourable reference, take this as a red flag.

You likely should insist that this is included in your settlement agreement.

No holiday pay

By law, you're entitled to be paid any holidays you've accrued but not yet taken.

If your employer has not included your holiday pay, you should check their calculations closely.

Insufficient termination payment (or no termination payment)

A good settlement agreement should include a fair payment.

Remember that by signing the settlement agreement you are likely giving up your right to claim anything else from your employer down the line.

No reason listed for termination

This is not a legal requirement but you may want your employer to include a reason, especially if you have an income protection insurance policy. These policies only pay out for specific termination reasons.

You need to get independent legal advice. It is likely your employer will pay for the cost of a solicitor who will provide this.

Remember that once you've signed the settlement agreement, it will be difficult to change or re-negotiate with your employer.

A specialist employment solicitor can provide advice on whether to sign and how best to negotiate for your rights with your employer.

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