Furloughing or Redundancy using a Settlement Agreement during the Coronavirus Crisis?
Settlement Agreements are useful as they allow a clean break when the employment relationship is about to end. This can include redundancy situations where the employee agrees to waive their right to bring claims in return for an agreed sum of compensation from their employer. This is usually instead of going through a fair redundancy process and being offered more than the employee’s statutory redundancy payment and contractual rights.
Currently, Settlement Agreements are being offered without any consideration that in this Coronavirus Crisis the government’s financial initiatives such as the Coronavirus Job Retention Scheme might offer a better solution than redundancy for both parties.
Employees should only enter into this type of Agreement if they are in a position to make an informed choice about the best option for them in the long term. This because the job market is extremely precarious and unlikely to stabilise in the near future.
Recently we dealt with a Settlement Agreement where the employee was an LGV instructor. His job was redundant due to a downturn in work. Since being put “at risk” of redundancy, many of his colleagues had been furloughed and were receiving furlough pay of 80% of their salary for a 3 month period.
Our client was not confident about finding another job and his preference was to be furloughed on 80% of his salary, instead of receiving a lump sum in redundancy pay and notice paid in lieu.
He had heard on the news that there were difficulties in harvesting and transporting fruit crops and lorries would be needed to transport these to the markets. This would require more people to be trained as LGV drivers.
We went back to his employer and asked if our client could be furloughed with the rest of his colleagues as he had not been made redundant before 1 March 2020. We argued that his redundancy was premature as the job situation was likely to change in the next few months. His employer listened and agreed to do this as they could see they might end up having to recruit more LGV driving instructors.
The Coronavirus Job Retention Scheme does not stipulate that at the end of this furloughing period ,employees have to be retained and can’t be made redundant, in order for the company to be able to reclaim the government subsidy of 80% of the employee’s salary, up to a cap of £2,500 a month.
We have found that reasonable employers understand that their staffing needs should be continually assessed due to a shifting economic landscape and have been open to reversing their redundancy decisions.
Furthermore, best practice employers have been keen not to leave their employees in a vulnerable position when staffing needs might change more positively in the future.
These are extraordinary times and it is important that employers and employees are flexible and are prepared to change direction to ensure the best outcomes for their business or their career.