Fiona Martin explains why employers making redundancies ought to think about using Compromise Agreements
A Compromise Settlement is a legally binding contract between you (the employer) and an employee. It sets out a mutual settlement to terminate the employment relationship whereby the worker waves their right to deliver any declare towards you in a courtroom or an Employment Tribunal. In return they obtained an agreed sum of compensation.
Such Agreements are used as a way to an end by employers and employees looking for to keep away from the prices, risks and delay of potential authorized proceedings. In brief, they provide peace of mind on each side. They're additionally an opportunity for you to supply an enhanced package deal to the worker going through redundancy.
With out a Compromise Settlement you would face an Employment Tribunal declare about your determination and procedures in terminating the employment relationship. For example, there have been cases the place disgruntled workers have used ex-gratia funds over and above statutory redundancy pay as proof of something amiss within the termination of their contract. With no Compromise Agreement, the employee can convey a declare against you and you will face appreciable expense in defending it.
However there are also benefits for the worker. For example, the authorized requirement for an employee to have independent authorized recommendation before getting into into a Compromise Settlement implies that they receive reassurance that the compensatory amount offered is fair. Employers often pay a contribution ? usually limited to a fixed sum - in direction of the authorized costs. In addition, compensation paid below the terms of the Compromise Agreement will probably be lots much less aggravating for the individual than the uncertainties of an Employment Tribunal or courtroom.
When and use Compromise Agreements
It is typical for a Compromise Settlement to be entered into shortly before or after the termination of an employee's contract. The worker receives legal advice to help them safe a good and cheap contractual and compensatory sum.
You'd be wise to seek specialist help as nicely. An employment regulation specialist can advise on the contractual and ex gratia sums offered. They will even ensure the Compromise Settlement is drafted in keeping with your requirements. For instance, the place an worker is about to breach restrictive covenants because they believe that these are now not enforceable resulting from breaches in your side, a sum of money might be provided to repeat the Restrictive Covenants in the Compromise Agreement.
Even when you've got used Compromise Agreements up to now, it's all the time wise to get knowledgeable confirmation that the phrases are up-to-date and enforceable.
If you're planning giant numbers of redundancies it's important to take employment regulation advice previous to deciding on the redundant workers and providing Compromise Agreements. You will need to follow the statutory dismissal procedure whether or not a Compromise Settlement is offered. That means you may be certain that if employees decide not to enroll, you'll not face additional claims at any subsequent Employment Tribunal. The place employers have failed to observe the statutory procedures, compensation awards could be increased by as a lot as 50%.