Redundancy v compromise agreement(14 Posts)
DH was told yesterday that he is on notice of redundancy. This is not unexpected as he is a professional in a highly paid, though dying industry. Although they would go through the usual consultation period it is unlikely that his employer will come up with a suitable alternative that he would accept (anything would be at the other end of the country). As an alternative, for a higher pay off, he has been offered a compromise agreement. Does anyone know why they would do this? You sign away your rights to claim anything further, but he can't see anything else he would claim for (seems to have been a fair process). There also might be restrictive covenants, but he will have those under his existing employment contract. Is there anything else? Is there a downside. Can he still say he was made redundant?
His employer would have to pay for him to get the agreement checked by a solicitor, who will advise him of the implications of what he would be signing. If the solicitor felt he had a case for something and was therefore in a position to negotiate more, he/she will advise on that.
Things like whether the dismissal will be called redundancy would often be in the agreement.
My concern would be what is the company's motive for doing this, if there is genuinely no risk of legal claims anyway.
Thank you flowery. They are indeed paying for a solicitor, and for independent outplacement advice. I think we will ask to see the proposed agreement before making any decisions - I am puzzled at the motive too.
With my husband's compromise agreement he couldn't say anything negative about the company or discuss what happened or the process or how much money they gave him. All he could say was "we have come to a mutually satisfactory agreement."
He also couldn't take them to an employment tribunal.
I signed one once. I wouldn't expect the solicitor they pay for to advise you if you could get more money though. You'd need a separate solicitor to do that I think.
I went through this recently.
If they are offering a compromise agreement it is usually because they want to get things sorted quickly and they do not want you to take them to a tribunal. They want to avoid the risk of being sued for unfair dismissal or constructive dismissal. They should offer substantially more money for a compromise agreement than they would need to legally for redundancy.
Normally you also negotiate an agreed reference and also what you say to colleagues and clients of the business, and you are not allowed to say anything negative about your former employer for the rest of your life - you sign away all your rights. Which is why you should expect quite a lot of money.
I would advise your DH to go and see a good employment lawyer as soon as possible and definitely before he agrees to anything.
My lawyer was v helpful - he did advise me about what sort of amount to negotiate (although I did the negotiation myself) and then checked the agreement afterwards, we asked for a few things to be changed. The cost of this was all met by my employer.
Just to reiterate - if they are offering a compromise agreement your DH should try and negotiate a higher amount. Don't accept their first offer. Presumably if he works in a highly paid but dying industry then it could take him quite a long time to find another similar job, and the amount he is paid should reflect this.
NB I am not an HR person or a lawyer, this is just based on my experience.
Presumably any money paid as part of a compromise agreement would be taxable whereas the first 30K of redundancy is not?
Nope - my payout under compromise was taxfree up to 30K
It varies. Some companies offer a compromise agreement where they know they have bogged things up and want to do a deal to guarantee no claims. That sort of situation would mean that you might be able to negotiate a better deal. However, I have a few clients who offer a good deal more than notice plus statutory redundancy. Because they offer more, they insist on a compromise agreement even though they have used a fair process: it's just a safety net and can also include the confidentiality provisions etc. You have to see an independent lawyer, who doesn't work for the company, to get the agreement signed off. The company will sometimes recommend some lawyers who you could use, but you are free to use whoever you want. I don't know any employment lawyers who wouldn't advise you to press for more if you had a claim: the fact that the company pays their fee (or some of it) doesn't compromise their independence.
I would normally put a CA in place if, as an employer, I'm paying anything more than I'm contractually obliged to - as a benefit to the company. While it may seem odd from your perspective to cover yourself if you've done nothing wrong, equally many spurious claims go to ET, and all are a huge cost in time and money for an employer. So it makes sense.
And as a rule, the legal advice paid for is only to tell you the effect of an agreement on your rights - more than this you'd have to pay for separately.
The other comment I'd make is to have the general terms of a reference included if you wish - but the inflexibility of such a reference can be obvious as an employer recruiting, and may imply that you've left under such terms that you don't trust your employer to give a normal reference. That's particularly an issue with firms that use tailored reference forms, or that take verbal references. So if leaving under good terms, I'd probably steer clear of any restriction, if it were me.
I disagree with EATmum as to the legal advice for which the employer pays.
The solicitor the employer pays for is your solicitor. You choose who to appoint and they work for you. The employer just picks up the bill. The employer can limit how much they will pay towards your legal costs but they cannot restrict what the solicitor does. The law says the advice must cover, "the terms and effect of the proposed agreement and, in particular, its effect on his ability to pursue his rights before an employment tribunal". The solicitor will therefore advise you if the proposed terms offer you the correct protection and should also advise whether or not you are being offered a suitable amount of compensation.
The reason the employer usually pays for your solicitor is that the agreement is only binding on you if you have received proper independent legal advice. It is therefore in their interests to ensure you have received appropriate advice.
Thanks people - I am really grateful for all these helpful comments. We are looking around our contacts for a good lawyer now. On reflection we remembered that this happened to one of DH's colleagues a couple of years ago and she took them to ET on grounds (amongst her former colleagues thought to be spurious) of sex discrimination. I don't know how that ended up, but maybe they just want to avoid such hassle. He almost certainly will not find alternative employment at anything like the same rate of pay. We need to sit down and look at the figures. One important point will be to get this all into next tax year, but I can't imagine that will be a sticking point. On the £30k point, he should get it as he will be paid more than that more than his notice period. Many people think that they can get £30k tax free, but if most of their payment represents contractual payment in lieu of notice they are likely to be disappointed.
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