Facing redundancy? What happens before a settlement agreement

If you've just been told your role is "at risk," you may not have a settlement agreement yet. But the decisions you make now can shape whether one is offered, and on what terms. Here's what typically comes first.

What does it mean to be told your role is "at risk" of redundancy?

Redundancy usually starts with your employer identifying that a role, or a group of roles, is at risk. Often due to restructuring, cost-cutting, or a business change. Being told your role is "at risk" doesn't mean you've been made redundant; it starts a process, and that process has to be handled fairly.

What is redundancy consultation?

UK law requires employers to consult with affected employees before confirming redundancies. Individually, and collectively if 20 or more redundancies are proposed at one establishment within 90 days. See GOV.UK's guidance on redundancy consultation for the government source.

How does redundancy selection criteria work?

Where only some roles in a group are being cut, employers should use fair, objective selection criteria. Such as skills, experience, performance records or disciplinary history. Rather than arbitrary or discriminatory factors. You're generally entitled to know, and can ask, what criteria are being used and how you've been scored against them.

What should you do during redundancy consultation?

• Attend consultation meetings and ask questions. This is your opportunity to understand and respond to the process, not just wait for an outcome
• Ask what selection criteria are being used, and request your own scoring if a matrix has been applied
• Keep a written record of meetings, including dates and what was said
• Raise any concerns about fairness or process in writing, calmly and factually, at the time. Not weeks later
• Consider whether you'd prefer to explore suitable alternative roles, if any exist, before your position is confirmed as redundant

What terms might you hear during redundancy consultation?

• Pooling. Grouping together employees doing similar roles who are all at risk, from which some or all will be selected for redundancy
• Selection matrix. A scoring system used to rank people in a pool against criteria like skills, experience or attendance
• Suitable alternative employment. A different role your employer offers instead of redundancy; see below for how the trial period works
• Bumping. Redundancy in one role leading to a knock-on dismissal of someone in a different role, to make space for redeployment
• Protective award. Compensation an employment tribunal can order if an employer fails to properly collectively consult before 20 or more redundancies
• Redeployment. Being moved into a different existing role within the organisation instead of being made redundant

What red flags should you watch for during redundancy?

Most employers run this fairly. But a few signs are worth noting, calmly and in writing, if you see them:

• Being told the outcome before consultation has genuinely started, or meetings that feel like formalities rather than real discussions
• Being refused sight of your own selection matrix scores, or given no explanation of how criteria were applied
• Being pushed to accept redeployment or sign something within an unreasonably short window
• Selection criteria that seem to track something other than skills or performance. For example, closely following recent sickness absence, maternity leave, or age
• Being discouraged, directly or indirectly, from raising concerns or bringing a colleague to meetings

None of these automatically mean something has gone wrong. Context matters. But if more than one applies to you, it's worth keeping a clear written record and mentioning it if a settlement agreement is offered later.

How much is statutory redundancy pay?

If you have at least 2 years' continuous service, you're entitled to statutory redundancy pay, calculated using your age and length of service: half a week's pay for each full year worked under age 22, one week's pay for each full year between 22 and 40, and one and a half weeks' pay for each full year at 41 or over. Length of service is capped at 20 years, and your weekly pay is subject to a statutory cap that's reviewed annually \u2013 check the current figure on GOV.UK's redundancy pay calculator before assuming a number. Up to \u00a330,000 of redundancy pay is tax-free. Your employer must confirm in writing how your redundancy pay has been calculated.

What is the 4-week trial period for alternative employment in redundancy?

Before confirming your redundancy, your employer may offer you a different role in the organisation \u2013 known as "suitable alternative employment." If you accept, you're entitled to a statutory 4-week trial period, starting once your old contract ends, to decide whether the role really suits you. If it doesn't work out for a reason connected to the role's suitability, you can leave during the trial and still keep your original redundancy entitlement. If you stay beyond 4 weeks (unless a longer trial was agreed in writing in advance), you're treated as having accepted the new role and lose the right to redundancy pay from your old one.

You don't have to accept an unsuitable alternative role. If it involves significantly lower pay, a much longer commute, or a real drop in status, you may have good reason to refuse it and still keep your redundancy pay \u2013 but an unreasonable refusal of a actually suitable role can mean losing that entitlement, so it pays to thinking this through carefully, and getting advice if you're unsure.

What if you disagree with your redundancy pay calculation?

If your employer won't pay what you believe you're owed, you generally need to write to them within 6 months of your job ending to formally claim it, and in some circumstances an employment tribunal can extend this to 12 months. Don't let this deadline pass by assuming it will sort itself out.

When might a settlement agreement be offered?

A settlement agreement isn't part of every redundancy. Many people are simply made redundant, receive their statutory (and any contractual) entitlements, and that's the end of it. A settlement agreement tends to appear when your employer wants additional certainty. For example, if there's a risk you might challenge the process, or if they want a faster, cleaner exit than the full consultation timeline allows.

Why does the early groundwork matter before a settlement agreement?

If a settlement agreement is offered later, the strength of your position. And often the size of the figure. Is shaped by how the earlier process was handled. A poorly run consultation, unclear selection criteria, or concerns you raised and had ignored can all become relevant. This is exactly why it makes sense to taking the consultation stage seriously, even before any settlement is on the table.

Been told your role is at risk, or already offered a settlement agreement? Get in touch. We can help whichever stage you're at.

Wherever you are in the process, free help with redundancy and settlement agreements is here to help.