A redundancy settlement agreement can set out your leaving arrangements and the payments you will receive in return for settling specified claims. Before signing, understand what you are already entitled to, what extra payment is offered and which rights you would give up.
Our settlement agreement solicitors advise employees facing redundancy and help them decide whether to accept an offer or seek changes.
Is a settlement agreement the same as redundancy?
No. Redundancy is a reason for ending employment, usually because a role is no longer needed. A settlement agreement is a separate legal agreement resolving specified claims or potential claims. An employer may offer one during redundancy discussions, but not every redundancy involves a settlement agreement.
The distinction matters because a headline package may combine existing entitlements with an additional payment for the agreement. Ask for each part to be identified.
Why has my employer offered an agreement?
Your employer may want certainty about the leaving date, payments and claims that will not be pursued. You may value an agreed package, reference or exit arrangements. The offer itself does not prove the redundancy process is fair or unfair, and it does not mean that every term should be accepted.
If you have concerns about consultation, selection, discrimination or alternative work, explain them to your adviser before signing. These concerns can affect the advice about the proposed waiver and whether negotiation is appropriate.
Do I have to sign to receive redundancy pay?
You do not ordinarily have to sign a settlement agreement to receive statutory redundancy pay to which you are entitled. Eligibility and the reason for leaving still need checking. An employer may make an additional discretionary payment conditional on signing, while a contractual enhanced entitlement requires separate consideration of the relevant terms.
Ask your solicitor to identify which sums are payable without the agreement and which are offered in exchange for it. Do not treat the entire proposed payment as extra compensation.
What payments should I check?
- Salary and other earnings due up to the agreed termination date.
- Statutory redundancy pay and any enhanced entitlement.
- Notice arrangements, including whether notice is worked, spent on garden leave or paid in lieu.
- Accrued but untaken holiday, with the balance checked against your records.
- Bonus, commission, pension contributions and benefits where applicable.
- Any additional compensation, its payment date and conditions.
Check whether redundancy pay is included in the headline total or paid separately. Compare the notice calculation with your contract and check the treatment of benefits. A payment schedule should make the position understandable without having to guess what the total includes.
Is my redundancy settlement offer reasonable?
There is no standard number of months that makes every offer fair. Relevant considerations include your existing entitlements, the circumstances of the proposed dismissal, potential claims, the evidence and your priorities. A quick payment may be useful, but it should not obscure an unpaid entitlement or a restriction that affects your next job.
Our settlement agreement calculator provides an illustration to help you organise the figures. It does not determine what your employer must offer or predict a tribunal award.
Can I negotiate a redundancy settlement agreement?
You can ask for changes, but an employer is not obliged to improve an offer. Negotiation can address the amount, payment date, reference, announcement, legal fee contribution or restrictions after leaving. Prioritise the changes that matter to you and take advice on how to put them forward.
Read our guide to negotiating a settlement agreement offer. If a deadline is short, ask for time to obtain advice rather than signing terms you do not understand.
Will the payment be tax free?
Do not assume the whole package is tax free because it is described as a redundancy settlement. Different elements can have different tax treatment. Read our settlement agreement tax guide and ask your adviser to check the breakdown and any tax indemnity.
What if I have another job offer?
Tell your solicitor before signing or agreeing an earlier leaving date. Check any statements about job offers, repayment conditions and restrictions in both the agreement and your employment contract. Read our guidance on references, restrictions and your next job.
What happens if I do not sign?
The next steps depend on your circumstances. The employer may continue the redundancy process, reconsider the offer or discuss alternatives. Refusing an agreement does not by itself settle any potential claims. Keep track of relevant deadlines while taking advice; settlement discussions should not be treated as an automatic extension.
Get independent advice on your redundancy settlement
Send the agreement, employment contract, redundancy correspondence and payment breakdown to your adviser. Our settlement agreement solicitors can explain the terms, check the figures and discuss whether changes should be requested. Call 0113 513 2047.
Further guidance: Acas on redundancy rights and Acas on settlement agreements.