Settlements vs Redundancy - Understanding Your Rights & Opportunities

When employment ends, confusion often arises over the differences between redundancy and settlement agreements. It’s crucial for employees and employers to understand both options and know that you’re never under pressure to say “yes” immediately.

What is Redundancy ?

• Redundancy is a statutory process triggered when an employer no longer needs an employee’s role - perhaps due to restructuring, cost-cutting, or relocation
• It requires:

A fair consultation and selection process

A statutory notice period

A redundancy payment based on your salary, age, and service length

What is a Settlement Agreement ?

• A settlement agreement (formerly called a “compromise agreement”) is a voluntary and negotiated contract that ends your employment on agreed terms

It typically includes:

A negotiated financial package (often more than statutory redundancy)

Waiver of rights to bring claims (e.g for unfair dismissal or discrimination)

Extras like favourable references, confidentiality clauses, or outplacement support. Unlike redundancy, there’s no requirement for a formal process, it’s a mutual agreement that is only legally accepted if you receive independent legal advice

Myth-Busting & Tips for Negotiation

1. “They’ll make me decide fast.”
   False. You have the right to take reasonable time to get legal advice, review and reflect
2. “I can’t change a settlement offer.”
   Not true. You can try to negotiate terms like pay-out amount, confidentiality clauses, or notice periods - requests that are often accepted
3. “Settlement always gives more money.”
   Often true - but it depends on your case. Employers may offer more than redundancy as an incentive for a clean break. However, redundancy packages are still enforceable and it may include extra contractual pay above the statutory minimum.
4. “If I don’t sign, I’ll lose everything.”
   If you reject the offer, your employer may revert to the redundancy process and you would retain your legal rights.

• Don’t be rushed. Take time to read and reflect, employers must allow a reasonable period to decide
• Seek qualified, independent legal advice. This is normally paid for by your employer if it’s part of the agreement)
• Negotiate to try to enhance financial terms, secure a reference or more favourable clauses
• Decide based on what’s best for you – a faster resolution with a settlement, or preserving full rights through redundancy ?

Whether you’re facing redundancy or being offered a settlement agreement, decisions about your employment shouldn’t be rushed or one-sided. Knowing your rights and options empowers you to navigate the process confidently.