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breakdown of the payments which have been agreed and whether any of them are to be paid tax-free.
Most settlement agreements will include a confidentiality clause, which requires the employee to keep the terms of the agreement, the settlement amount and the reasons for the agreement confidential.
The costs involved In terms of how much a settlement agreement may cost a business, there is no set scale of payments, as the amount of any settlement payment depends on the circumstances of each case.
There are several key factors to consider when deciding the amount, these include:
• How long the employee has worked for the business
• The circumstances around why they are being offered a settlement agreement
• How long it would take to settle the dispute normally
• The potential liability/cost of having to defend the claim at a tribunal
In addition to the cost of the settlement payment itself, it’s not uncommon for the business to cover or contribute to the individual’s legal costs, as they are required to seek independent legal advice on the terms of the agreement.
This statutory requirement, set out in section 203(3) Employment Rights Act 1996, states the legal adviser must be named in the agreement and have relevant insurance to cover the advice given.
This can vary between businesses, but the amount of this contribution is typically capped between £250 - £500, which should be outlined in a clause within the settlement agreement.
Moving forward positively October’s deadline for furlough support will be
FOR INCLUSION CALL THE CLASSIFIEDS TEAM ON 0208 092 5227
a challenging time for employers and employees alike, especially as businesses face the difficult task of restructuring to cope with mounting financial pressures.
However, with question marks surrounding their long-term survival, businesses will have to make some tough decisions, including largescale redundancies, to weather the storm and protect themselves.
In order to move forward positively, it’s crucial that both parties have a ‘clean break’, and in some cases, this will mean relying on settlement agreements to ensure the best possible outcome is achieve for all parties.
If your business is considering redundancies as part of a wider restructure, then it’s important to contact a team of experienced employment lawyers, who will advise you on how to proceed safely and effectively.
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