Acceptance of redundancy volunteer with settlement agreement

Where an employee volunteers for redundancy, one option is to make your acceptance subject to their entering into a settlement agreement, particularly if you’re offering enhanced redundancy payment terms.

Legal position

Provided there’s a genuine redundancy situation, at the start of your redundancy consultation process you can ask for volunteers for redundancy. It’s not a legal obligation to request volunteers, but it’s good practice to do so, as it may avoid (or reduce) the need for compulsory redundancies. Termination of employment due to voluntary redundancy still counts in law as a dismissal, i.e. it’s not a resignation – so normally you must still continue to follow a fair redundancy procedure in relation to volunteers, including full individual consultation and continuing to explore alternative employment options. However, where there’s an ex gratia enhanced redundancy payment on offer for volunteers, you might want to make your offer subject to the employee entering into a settlement agreement (it’s unlikely they’ll agree to a settlement agreement where you’re only offering statutory minimum redundancy terms). So, where an employee does volunteer for redundancy and you provisionally accept them but subject to their signing a settlement agreement, use our Acceptance of Redundancy Volunteer with Settlement Agreement letter. It encloses a settlement agreement so that they can then take legal advice.

Without prejudice

Our letter is marked “without prejudice”. The without prejudice rule applies to statements made in a genuine attempt to settle an existing employment dispute. However, where a settlement offer is made as a result of an employee volunteering for redundancy, before they’ve been selected for compulsory redundancy, it’s arguable that no dispute has arisen yet and so the without prejudice rule doesn’t apply. Although marking correspondence as without prejudice doesn’t ensure the rule applies, we’ve included the wording to support the argument that the discussions about voluntary redundancy are without prejudice and therefore inadmissible as evidence in any subsequent court or tribunal proceedings.

Independent legal advice

It’s a requirement for a valid settlement agreement that the employee takes independent legal advice on the agreement’s terms and effect, so our letter covers this aspect. We’ve also provided for you to pay a contribution towards the employee’s legal fees.

Employee’s options

If the employee is willing to proceed with the settlement agreement, our letter asks them to confirm this to you by a set deadline and then to seek urgent legal advice on the agreement. Alternatively, if the employee no longer wishes to be considered for voluntary redundancy, our letter gives them the option of withdrawing and confirms that you’ll then continue with the formal (compulsory) redundancy process. You’ll also need to do this if settlement negotiations break down prior to signature of the agreement.