Dayna Rodrigues and Victoria Eustace, in our Employment Law team, explain what employees and employers should consider when facing a redundancy situation or dealing with a settlement agreement.
This Summer, a survey published by Acas (the Advisory, Conciliation and Arbitration Service) suggested that one third of employers are likely to make redundancies by January 2027. This forecast is not unrealistic as many businesses continue to face high operating costs and reduced demand in the context of wider economic uncertainty and alongside the continued changes to employment rights resulting from the Employment Rights Act 2025 (ERA ’25).
For employers, carrying out a redundancy consultation exercise can be a daunting prospect. For employees, being placed at risk of redundancy, engaging with a consultation process and reckoning with the possible outcomes, can be very unsettling.
Consultation
In England, a fair (individual) redundancy consultation process would generally involve (but not necessarily be limited to) an employer explaining the business reasons for the proposed changes, identifying who is at risk of redundancy as a result, consulting and supporting affected employees, considering alternatives to redundancy such as redeployment and applying any selection criteria fairly and objectively before any final decisions are made.
At present, and subject to upcoming changes in line with the ERA ’25, where 20 or more redundancies are proposed within a 90-day period at one establishment, collective consultation rules apply and specific minimum consultation periods must be followed.
For further information, please see our blog article on ‘Redundancy FAQs – A Guide for Employees’.
Settlement Agreements
A settlement agreement is a formal written agreement between an employer and employee that sets out the terms and conditions for settling an employment dispute. A settlement agreement is not a necessary part of a redundancy process. Employees are not entitled to be offered a settlement agreement. In the context of redundancy or potential redundancy, a settlement agreement might be offered, but this is not guaranteed.
Common terms contained in settlement agreements include (but are not limited to):
- The date any proposed termination of employment will take effect;
- Details of any payments to be made;
- Agreement by the employee to waive their rights to bring any potential legal claims they might have against the employer;
- Confidentiality and non-disparagement obligations.
It is important that the employee is given reasonable time to consider any proposed settlement agreement. Acas’ Code of Practice on settlement agreements recommends that an employee is given at least 10 calendar days to consider a settlement agreement. In order for any settlement agreement to be legally binding and valid, an employee must receive independent legal advice from a qualified adviser, usually a solicitor, on the meaning and effect of the settlement agreement. This advice must be obtained before the agreement is signed. Employers will commonly contribute towards the cost of that advice but there is no legal obligation to do so. Consequently, employers often offer a nominal sum in order to encourage employees to seek the requisite legal advice. It is important that employees choose their own adviser (i.e. the adviser must be independent of the employer).
You can read our blog article, ‘Redundancy FAQs – A Guide for Employees’ for more information about settlement agreements.
Summary
If you are at risk of redundancy and would like to discuss your situation, you are seeking advice on a settlement agreement, or in relation to any other workplace issue, our expert Employment Law team is here to help. Naturally, we also act for employers of all sizes and advise on all aspects of Employment Law, so should you require advice and assistance on behalf of a business in relation to managing a redundancy process or regarding any other workplace matter please get in touch.
For further information or legal advice, please contact law@blandy.co.uk or call 0118 951 6800.
This article is intended for the use of clients and other interested parties. The information contained in it is believed to be correct at the date of publication, but it is necessarily of a brief and general nature and should not be relied upon as a substitute for specific professional advice.
