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Will the end of furlough lead to more settlement agreements?

With the furlough scheme coming to a close at the end of October, Lodders’ employment law expert, Faye Reynolds, examines whether the end of the scheme will prompt an increase in the number of settlement agreements.

Background

The government’s Coronavirus Job Retention Scheme, often known as the furlough scheme, will come to a close at the end of October.

As employers begin to make decisions in advance of the furlough cut-off date of 31st October 2020, there’s expected to be a surge in settlement agreements, with the possibility of employers being more willing to negotiate in order to settle with furloughed employees before the scheme ends.

The new Job Support Scheme

The government has recently announced a new Job Support Scheme, starting 1st November 2020. The scheme involves the government supporting the wages of people in work and giving employers the option to keep people in work on shorter hours, rather than making employees redundant. Under the new scheme, employees will have to work at least one-third of their normal hours, paid for by the employer. The cost of hours not worked will be split between the employer, the Government (through wage support), and the employee (through a wage reduction).

The scheme will run for six months and has been welcome news for many. However, many business owners feel that the scheme does not go far enough, and for businesses that are unable to provide employees with a third of their normal hours, it is likely that there will be more redundancies in the coming months.

Potential increase in settlement agreements

Redundancy-related dismissals are likely to lead to an increase in settlement agreements, as businesses look to reduce the risk of tribunal claims being brought against them.

A settlement agreement is a contract between an employee and an employer, used to end employment on agreed terms. In return for the employee waiving their right to pursue any claims in an Employment Tribunal or a Court, they are usually offered some form of compensatory payment, and other terms such as an agreed reference and agreed announcement statement regarding the individual’s exit from the business.

Securing positive outcomes for employees and employers

It is clear then that the fast approaching October 31st deadline will be a difficult time for both employers and employees, with many tough decisions to be made.

If your business is considering redundancies, then it is important to seek guidance from an experienced employment solicitor. If you are offered a settlement agreement, it is vital to seek advice to ensure you receive the best possible terms on your offer.

Lodders’ employment law team works with a range of clients, from owners and managers of SMEs and large corporations, through to long-serving employees and senior directors. We take a supportive and pragmatic approach to help our clients deal with challenging situations and navigate the best possible outcome in the circumstances.

For more information on settlement agreements, or any employment related matter, please contact Faye Reynolds on 01242 229093, or via email.

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For more information on settlement agreements, or any employment related matter, please contact Faye Reynolds on 01242 229093, or via email.