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Sadly, the impact of the Covid-19 pandemic on businesses has led to an increase in people being made redundant. The Office for National Statistics recently reported redundancy rates have increased faster during the pandemic than during the 2008-2009 economic downturn, and with further uncertainty ahead, many employers are continuing to reduce their workforces. This has led to an increase in employees being offered settlement agreements.
What is a settlement agreement?
A settlement agreement (previously known as a compromise agreement) is a legally binding, voluntary contract between an employer and employee. The contract provides that an employee agrees not to pursue any claims against the employer in a tribunal or court in exchange for the payment of a severance sum to the employee. A settlement agreement may be appropriate where the employment relationship is continuing, but it is most common for these agreements to be entered into where the employment has terminated (or is about to do so).
Since many businesses have faced financial difficulties during the pandemic, it’s likely that the use of settlement agreements will be favoured by employers. This will give employers peace of mind as it will remove any risks of employment-related claims being brought by employees and will firmly draw a line under the employment relationship.
What should you do if your employer offers you a settlement agreement?
A settlement agreement will not be...
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