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ThomasMansfield Reveal How to Get the Best from a Severance Agreement

LONDON, February 11, 2013 /PRNewswire/ --

Are you thinking of leaving your job? Employment solicitors ThomasMansfield are on hand to help you read between the lines

Few employees need telling that the face of the jobs market has altered remarkably in the last four and a half years, since the credit crunch of 2008. In that time, 2.7 million people have been made redundant - equivalent to one in ten employees at the start of the recession.

The increasing instability of modern workplaces - where flexible contracts and freelance operations allow both more freedom yet also a much reduced sense of support and ongoing growth - means that redundancy is no longer a distant nightmare, but a much more pressing threat.

For employees who face redundancy in 2013, the fact is that their own performance may well have very little to do with it. Increased economic pressures and the demand to downsize on companies which, prior to the recession, were expanding exponentially, are hitting employers hard.

Ironically, even redundancy itself is an expensive business - it is estimated to have cost UK employers £28.6 billion in the last four and a half years; and with more big name companies reporting losses or liquidation (HMV now potentially joining recent names like Jessops), it is not going to go away.

What does a severance agreement  have to do with redundancy?

When an employer wishes to make an employee redundant, the employee may be offered a severance agreement.

Also known as a compromise agreement, this agreement makes an arrangement for the employer to pay the employee a certain amount of money so that the employee will contractually agree not to file any complaints or claims against that company.

It sounds like a tricky business because it is a tricky business. For both employers, and especially the concerned employees, it is something of a minefield.

The purpose of the agreement is simple:

  • to ensure that employer and employee walk away from the table with a guarantee that there will be no further disputes

How does it happen?

It is common to use a solicitor to help the employee through the many potential issues of a severance agreement. In order for the employer to be able to enforce the agreement the employee must receive legal advice on the agreement before the agreement is signed.

The employer will usually make a contribution towards the employee's costs for receiving legal advice on the agreement. The key questions the solicitor or advisor will be looking to resolve are:

  • Is the clause understandable to the employee?
  • Does the employee have any claims against the employer that are not addressed in the agreement?
  • Is the compensation offered by the agreement fair?
  • Is the compensation sufficient to ensure that the employee will not launch any later claims against the company?

This process is usually followed by a discussion between the parties on any outstanding issues before the agreement can be signed. Employees are reminded that once a compromise agreement is signed, it is not possible to take the company to court regarding employment law issues unless the company itself has broken the terms of the agreement.

Sources:

http://www.thomasmansfield.com/employees/compromise-agreement/

http://www.findlaw.co.uk/law/employment/losing_a_job/500395.html

http://www.cipd.co.uk/pressoffice/press-releases/redundancies-since-jobs-recession-140312.aspx

http://www.bbc.co.uk/news/business-21023602

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