Furlough and Settlement Agreements Post-COVID

As the end of Coronavirus Job Retention (Furlough) Scheme approaches fast (31st October 2020), we focus here on the option that employers have of using a settlement agreement in order to manage their workforce requirements when faced with the uncertain economic effect of Covid-19. We also look at settlement agreements here from the point of view of employees who have been offered them.


What happens when Furlough ends?

Furlough has provided a means to avoid employees being made redundant by partly funding their wages if it is unsafe for them to go into the workplace and if they could not work from home. Nonetheless many employers have still felt the need to make redundancies and as the Furlough scheme comes to a close this will be further to the forefront of the minds of employers that are concerned over the longer term impact of Covid-19 on the economy. In some cases, this may involve a settlement agreement which offers employees the potential to receive a better redundancy package while also preventing them from bringing an employment tribunal against the employer.

It should also be stressed that employers can also make employees redundant at any point while the Furough scheme is in place. On the flip side, to encourage job retention, and before going down the redundancy or settlement agreement route, employers should consider that the government will pay businesses a £1,000 bonus for every furloughed employee employers keep on until the end of January.

What is a protected conversation?

The concept of a protected conversation is to allow employer to enter into discussions with an employee with a view to terminating their employment under a settlement agreement, without the parties being able to rely on the details of the conversation as evidence in an unfair dismissal claim. This is therefore when employees usually first become aware that they will be offered a settlement agreement and is often completely out of the blue. It is immediately following that protected conversation that many employees sensibly decide to take legal advice.

What are the key features of Settlement Agreement?

A Settlement Agreement is a legal contract entered into between an employer and an employee to end the employment relationship.

When entering into a Settlement Agreement, an employee would normally agree that:

  1. their employment is terminated,
  2. they accept a sum in compensation, and
  3. they agree not to sue their employers.

Every settlement agreement must be supported by independent legal advice provided to the employee with the legal fees of such advice met fully or, at least, partly by the employer.

What are the benefits of a Settlement Agreement for an Employee?

Difficulties and conflicts at work are often extremely stressful for any employee. Instead of spending weeks or months involved in internal procedures, mediation and an Employment Tribunal claim, many employees prefer to move on and put any dispute behind them. The financial compensation paid under a settlement agreement can reflect what has taken place and should be over and above the employee’s contractual entitlements and statutory rights. The payment under the settlement agreement would therefore often in effect constitute an enhanced redundancy package. This ultimately then means an employee can get compensated without the stress and uncertainty of going through an Employment Tribunal process.

What are the benefits of a Settlement Agreement for an Employer?

A Settlement Agreement is often a mechanism to implement a commercial decision to end a dispute quickly and sensibly, without admitting any fault or liability and also keeping any dispute confidential.

Even after a lengthy internal process, an employer may still be taken to an Employment Tribunal in any event, with little to gain from even if the outcome of the proceedings is in favour of the employer. The employer will have unrecoverable legal costs and valuable management time gone forever, not to mention the potential bad publicity. Settlement Agreements circumnavigate such negative scenarios and give an employer certainty, and control over their costs, and they are effective in terms of risk management.

Let us take it from here

If you have been provided with a settlement agreement by your employer, we shall be pleased to assist you in providing the required advice and your employers will often agree to pay all your legal fees for obtaining that advice.

If you are an employee or employer and would like further information, you can speak to a member of our staff on 020 8891 6141. Alternatively, contact Jamie Jones or Paige Symns to discuss your settlement agreement