Redundancy and Compromise Agreements

Compromise agreements may come into play in a redundancy situation. As the economy worsens, it is advisable for employees to check their contracts of employment for company redundancy procedures. This will allow an employee to be prepared if your company announces redundancies. Unfortunately, it is inevitable that these documents will contain terms which are difficult to understand for a lay person. It is important that you read between the lines and seek the assistance of an employment law solicitor if needed.

Whilst compromise agreements may come into play, it is first important to understand how redundancy works. Accordingly, we have compiled a list of frequently used terms to assist you in understanding your employment law situation -

More information on compromise agreements, see here:

redundancy compromise agreements



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A redundancy compromise agreement may arise if the redundancy procedure is not carried out properly. Unfortunately, there are may misconceptions as to what redundancy is and how compromise agreements can help resolve the problem. In reality, there is a legal definition to redundancy. In a nutshell, redundancy is when a job role within an organisation is at a stage is no longer needed. This may be because of new technologies which allow a business to become more automated. It can happen if an organisation goes bankrupt, closes a particular store or department, loses key clients, or advances in technology could make manual tasks unnecessary.

Furthermore, redundancy falls into two categories - voluntary and compulsory. With the former type, this usually happens when cut backs are necessary at an organisation. An employer would issue a request to employees to step forward on their own accord. Unfortunately, with compulsory redundancy the process is often not as nice. A fair procedure is used by employers and employees are selected based on a pre-set criteria. Those falling foul of the selection process will be asked to leave the company, against their wishes.

Lay off


From time to time there may not be enough work to go around all the employees. Someone could be 'laid off' on a short term basis. Please note that this is not redundancy at this stage.

Short Time Employment

Where an employee has their hours and pay reduced below half a week of the norm. Another alternative to full redundancy.

Collective Redundancy Consultation


In situations where an employer has the intention of creating a lot of employees redundant (twenty or more), it must go through a collective redundancy consultation, furthermore, the BERR should be told of the planned redundancies by letter. An meeting should be organised with employees to inform them of the procedure. The time an employer needs to provide varies depending on the size of the redundancies. If there are more than twenty employees then an employer needs to allow 30 days. For 100 employees or more, there needs to be 90 days notice at the very least.Employment law advice should be taken because there will be employment claims made against the employer for unfair dismissal.

Legal entitlement to redundancy package


This is defined as the amount obtained by an employee as part of the redundancy procedure. An employee may be able to receive more than this through a compromise agreement. If an employee has been employed full time for more than two years then there is an entitlement to statutory redundancy pay. Your company may give more you more than this, particularly if you have a potential claim against them. The actual amount received by an employee is dependant on the number of years worked at the company, limited to 20 years. These calculations are beyond the scope of this articles. An employment law solicitor will be able to advise you further. Every organisation is different and it may vary somewhat from company to company. Ask your company for a detailed procedure so that you may consider your options and come to an informed decision on what to do. Unless the redundancy pay is over £30,000, it will not be taxed.

Unfair Dismissal

If you feel you have been unfairly and (more importantly) illegally selected for redundancy, you can lodge a claim for unfair dismissal. In instances where an unfair procedure has been implemented, an employee may raise this point with an employment law solicitor. This could result in a large pay out if you can prove your case. A company will try to avoid going to court over this and may offer you a compromise agreement. Certain reasons for dismissal (usually to do with discrimination on a wide variety of grounds) automatically qualify as unfair dismissal.

Guarantee Payments


It does not matter if there is no work at a company, provided there is a guarantee of payment in place. Contracts of employment usually guarantee pay, regardless of the amount of work done by an employee. This provides security to the employee, as an employer may not vary the contract of employment without prior consent.

Protective Award

If a proper redundancy consultation procedure is not followed . The importance of following the right procedure can not be stressed enough. An employer will open themselves up to liability and may have to pay 90 days payment, should the employees make a claim.


Redundancies do not always go to plan and in situations like this, the use of a compromise agreement may be the most cost effective route of action, for all sides concerned.For many, using a compromise agreement is good, as it saves time and unwanted additional costs.Of course, as the name suggests, it is a compromise and will result in additional costs for an employer. It is however, very good news for an employee. In order to make the most of the situation, employees and employers should seek legal advice from an employment law solicitor.

More information on compromise agreements, see here:

Redundancy and Compromise Agreements
Redundancy and Compromise Agreements
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