If companies go through a program of voluntary redundancy compromise agreements are essential for both the staff who are being made redundant and for the employer.
Compromise agreements were introduced into UK employment law to streamline the process for settling an employment dispute once and for all. Previously, contracts between staff and their bosses that contained terms overruling any of the employment rights given to staff by statute could be rejected by employees later.
Because of the risk (real or imagined) that unscrupulous employers could force employees to accept agreements that were not in their best interest these agreements had to be approved by either a court, employment tribunal or the Advisory, Conciliation and Arbitration Service (ACAS) before they could be binding on an employee. This led to delays that in many cases did not help anybody.
The solution provided by compromise agreements was that a qualified independent adviser has to approve the agreement before it came into force. The independent adviser (usually a UK solicitor who is an employment law specialist) has to be satisfied that the employee understands what he is signing, and that he is giving up his statutory rights.
The value of compromise agreements to the employee is that he or she will
- typically leave with more than the minimum payment that would have been awarded for redundancy,
- is in control of the terms and timing of when the employment will end, and
- often be able to agree the terms of a reference to be shown to any new employer.
Even more important, the deal will have been set down in writing and contain rights that will definitely be legally enforceable without all the stresses and uncertainties of litigation.
The employer will also benefit from agreeing a compromise agreement because he
- will be able to control who is offered redundancy terms so people who will be most useful to the business in future will not leave first, and
- management time is not taken up with handling disputes, or, even worse,
- facing a claim in the employment tribunal or county court.
There will also be the benefit of knowing that because he has made a binding agreement with the redundant employee there is no risk of him facing any employment claim in the future.
Having to dismiss staff is a bad experience for both employers and employees, but with a voluntary redundancy compromise agreement can help smooth the process and build the future for both parties on secure foundations.