What Is a Severance Agreement
The prospect of facing a redundancy can understandably cause significant concern for individuals and families. If your role is affected by redundancy, you will likely be presented with a severance agreement. This document, occasionally referred to as a compromise or settlement agreement, is not just the terms for your redundancy pay, it is a full and final legal contract.
When you sign a severance agreement, you are formally waiving your right to take any future legal action against your employer regarding your employment or your dismissal. Because the rights you are giving up are so substantial, the law strongly protects employees in this scenario. For a severance agreement to be completely watertight and legally binding, you must obtain independent legal advice before putting your name on the dotted line.
Reviewing the Financial Terms and Ex Gratia Payments
A standard severance package will typically include your statutory redundancy entitlement alongside your notice pay and any built-up holiday pay. Employers frequently offer an additional sum known as an ex gratia payment to encourage you to sign the agreement.
When you bring your agreement to a solicitor, they can calculate exactly what you are legally owed to ensure the offered package is fair and accurate; and can verify that the ex gratia amount provides adequate compensation for the significant employment rights you are being asked to surrender.
Restrictive Covenants and Future Employment
The document will often contain specific clauses dictating what you can and cannot do after your employment ends. These restrictive covenants might attempt to prevent you from working for a competing business or contacting former clients for a set period.
A solicitor can examine these restrictions closely to confirm they are reasonable and will not unfairly hinder your ability to secure a new job in the local market. If a clause is overly broad, they can negotiate with your employer to have it amended or removed to protect your future career prospects.
Employer Contributions to Your Legal Fees
A common concern for employees facing redundancy is the cost of hiring a solicitor. Because independent legal advice is a strict legal requirement for a valid severance agreement, it is standard industry practice for your employer to cover this expense. The agreement itself will usually contain a clause stating that the company will pay a set contribution towards your legal fees. In the vast majority of cases this contribution fully covers the cost of our consultation so you are not left out of pocket.
Protecting Your Interests During Redundancy
Losing your job is a highly stressful experience and employers often impose tight deadlines for returning signed paperwork. You should never feel pressured into signing a complex legal document without fully understanding the implications.
At MM Halley and Sons our employment law team will sit down with you and translate the legal jargon into plain English. We will make sure that you know exactly what you are signing and that the agreement serves your best interests before you make any binding commitments.
If you have been handed a severance agreement or compromise agreement following the recent redundancy announcements, do not sign it without fully understanding your rights. Call our office to schedule an immediate consultation.
