In today’s financial market, redundancies are unfortunately becoming a reality for many businesses and employees. We are seeing a marked rise in settlement agreements being offered, as employers attempt to navigate fair and mutually beneficial terms for redundancy. However, the process is often fraught with difficulties, and a misstep in negotiations, or in the drafting of the settlement agreement can cause the process to quickly unravel.
With that in mind, we have set out our top 10 tips for drafting and negotiating settlement agreements, to help both employers and employees who find themselves in this situation.
It is perhaps unsurprising that this would be our first tip, but we really do recommend that anyone, employer or employee, who is going through a redundancy situation, or in discussions regarding a settlement agreement obtains legal advice early on. When mixed up in tense negotiations, it can be very difficult to see the wood for the trees, and to know when there is a genuinely good offer on the table. Hard feelings can muddy the waters and sometimes it takes an outside perspective to offer insight and move negotiations forward.
It is also good to seek the advice early, before concessions have been made that may not be in the parties’ best interest. For many parties in this situation, it is not something that they have had a lot of experience dealing with, whereas a solicitor should be well versed in what a good deal looks like for the employer or the employee, and should be au fait with best practice to negotiate a better deal. It is difficult to roll back a situation that has advanced too far, where cards have already been laid on the table, so engaging legal expertise early can make sure that the parties’ rights and interests are protected.
It is worth also noting that most settlement agreements include an employer contribution for the employee getting advice on the agreement. With costs rising for everyone, including average rates for solicitors, we recommend that employers ensure that they are offering a sensible rate for this, so that the employee will actually get proper advice and avoid potential unnecessary costs down the line.
As above, if you have sought legal advice early, your solicitor should be able to explain this to you properly, and can save you the time and the risk of misunderstandings.
Open and honest communication from both parties fosters trust and allows both to express their concerns, facilitating smoother negotiations. Your solicitor can help ensure that communications remain professional and calm, and can help provide a buffer where emotions are running high. .
Whether you are the employer or the employee, you should enter any meeting about a settlement agreement well prepared, knowing your available options. We always encourage clients to think early about what their top and bottom line is. That can be difficult if you have never been in this situation before.
For employees, it can be tempting to think about cases you’ve heard about where people received huge pay-outs from employers, or colleagues who you know got a lot. However, it is important to be aware of your specific circumstances. Think about how long you’ve been with the employer, what your role was, how long it might take you to get another job, and most importantly, try to be realistic. You will only end up disappointed if you go into a discussion with a completely unrealistic goal. One of the benefits of talking to a solicitor early, is that we can help to guide you on what is actually realistic in your circumstances.