Employment Settlements – What You Need to Know.
For some businesses, there may come a time when they are forced to “let staff go” to protect the organisation.
Whether this is due to financial pressures, a change in market conditions, changes in legislation or something else, once the decision has been made to make redundancies and the relevant consultation periods have been completed, there tend to be two outcomes:
- Voluntary Redundancy
- Compulsory Redundancy
Both options involve an Employment Settlement which is presented to the employee and it is recommended that they use an experienced employment law solicitor to review the settlement to ensure they agree to the terms.
In the following article, we answer some of the common questions we are often asked when it comes to Employment Settlements.
What is an Employment Settlement?
Employment Settlements are legally binding contracts between an employer and employee and are used to outline the terms under which the employee will leave the company, often in exchange for financial settlement.
What does the settlement include?
The settlement includes a range of terms under which you will legally depart the business, including:
Redundancy payment
The amount of money the employee receives from the employer. This can vary between individual depending on their job role, how many years of service they have completed as well as many other factors.
Notice period
This is the period the employee is required to continue working until they leave the company. This may be reduced due to factors such as annual leave accrual and some companies may require them to stay away from the business while they serve their notice period, also known as “gardening leave”.
Payment in lieu of Notice
Payment in lieu of notice (PILON) is a payment made by an employer to an employee when the employee’s contract is terminated without notice.
Instead of requiring the employee to work through their notice period, the employer compensates them for the notice period with an immediate lump sum payment.
This type of payment is typically equal to the employee’s normal salary and benefits for the duration of the notice period they would have worked. PILON is often used to expedite the termination process, allowing the employee to leave immediately rather than continue working during the notice period.
Confidentiality
Depending on the job role, there may be “covenants” included within the settlement which prevent the employee from working for competitor organisations for a fixed period, within a geographical radius or both. A lawyer can advise you whether this is fair and reasonable.
Return of Company Property
Company-owned assets such as mobile phones, laptops, vehicles, tools, clothing, etc. will need to be returned to the employer unless otherwise stated in the settlement. Advice on how to return this and when will also be included.
Why do I need to use a solicitor?
The settlement is usually drafted in favour of the employer and while it is unlikely that there are terms included that will penalise the employee, an experienced lawyer will be able to guide you through the document and explain various legal meanings.
In many instances, employees see a “lump” payment yet overlook the finer detail, e.g. covenants which, if breached, may result in the lump sum (or part of it) having to be repaid. A solicitor can help you avoid these pitfalls and prevent legal problems.
How much does a solicitor cost?
The good news is that you normally don’t have to pay to have a solicitor review the settlement for you. This cost is normally paid for by the employer.
Do I have to use an employer-appointed solicitor?
No. As long as the solicitor you choose is SRA-approved, you can use any qualified employment lawyer.
Can Peter Lynn and Partners Solicitors help me?
Yes.
We have one of the best employment law teams in the region and have helped thousands of employees successfully navigate their way through employment settlements.
What do I do next?
Contact us on the following and arrange a FREE meeting:
01792 450010