These two terms get used interchangeably, but they describe different things — and knowing which applies to you affects what you should expect to receive.
Redundancy describes why your employment is ending — your employer no longer needs your role to be done, or needs fewer people doing it. A settlement agreement is a legal document that can be used to formalise the end of your employment for any reason, redundancy included. The two overlap constantly, but they are not the same thing: you can have a redundancy with no settlement agreement at all, and you can have a settlement agreement that has nothing to do with redundancy.
Many redundancies proceed in the ordinary way: your employer follows a fair selection and consultation process, and you receive your statutory redundancy pay (and any enhanced package the employer offers), notice pay, and other accrued entitlements. In this scenario, you are not usually asked to sign away any legal claims, and there is no need for independent legal advice for the payment itself to be valid.
Sometimes an employer wants to move faster than a full consultation process, or wants a clean break with no risk of a later claim. In these cases, they will offer a settlement agreement alongside (or often instead of) redundancy pay, which includes a payment in exchange for you waiving your right to bring employment claims. Because you are giving something up — your legal rights — the law requires you to receive independent legal advice before it becomes binding.
If you are offered a settlement agreement in a redundancy situation, the key question is whether the total package genuinely reflects both your redundancy entitlement and fair compensation for the claims you are being asked to give up. We check whether the redundancy itself was genuine and fairly handled — see unfair dismissal — whether the numbers add up, and whether the agreement contains anything unusual, such as restrictive covenants you would not otherwise be bound by. If your role is affected by a business transfer rather than a straightforward redundancy, different rules may apply — see our guide to TUPE.
Call us on 020 3058 3365 or complete the form for a free, confidential assessment of your redundancy or settlement agreement, or both together.
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