BackLatest News and Articles - July 2010
Redundancies and Compromise Agreements
The new government has begun to publicise its plans to implement cuts to the public sector. Whilst there are differences of opinion as to numbers involved there is widespread acceptance that the cuts will result in substantial job losses. While many of these may be through “natural wastage” such as retirement there will inevitably be redundancies, which are likely to include compulsory as well as voluntary redundancies.
An employer, whether a private company or public body, must follow a procedure before making redundancies. This should include consultation with the affected employees. Consultation must include discussions as to ways of avoiding the redundancy.
All employees who have been with their employer for two years or more are entitled to a redundancy payment in addition to notice. There is a minimum amount for a redundancy payment set down by law, which is calculated on the employee’s age, length of service and pay. Many employers have existing policies will allow for payments to those employees made redundant which are more generous than the legal minimum.
If an employer is paying an amount above the legal minimum they will commonly insist that a binding agreement is signed by the employee to prevent the employee taking any legal action arising from the redundancy. This type of agreement is known as a Compromise Agreement. For a compromise agreement to be binding the employee must have received independent legal advice on the terms and effect of the agreement. The employer will generally meet the cost of this advice.
If you are an employer considering the need to make redundancies or an employee affected by potential redundancies or with a compromise agreement then contact David Trood at our Uxbridge office for further advice.