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Enhanced Redundancy Payments and Settlement Agreements

Enhanced Redundancy Payments and Settlement Agreements

If an employee is being made redundant they will be entitled to a period of notice and, for those with at least two years’ service, a statutory redundancy payment.  They should also be paid in respect of accrued but untaken holidays, if appropriate.

Statutory redundancy payments can be relatively small therefore some employers offer a payment in excess of the statutory minimum – usually called enhanced redundancy payments.  This can be offered for a variety of reasons: 

  • it may be that it forms part of agreed terms and conditions,
  • or an employer may simply wish to make sure a redundant employee has more of a financial cushion until new work is found. 

Enhanced payment are also common where an employer wishes to incentivise staff to volunteer for redundancy.

In return for the additional payment an employer will commonly require the employee to sign a Settlement Agreement – a legally binding agreement in which the termination of employment is documented and the employee waives any claims against the employer.  The employee must take independent legal advice before signing the agreement, which the employer normally pays for.

If you wish to discuss redundancy or settlement agreements please contact our employment law team.

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Written by : John Norrie