This is a question being asked by many of our customers as they attempt to reorganise their businesses, as the Government’s Coronavirus Job Retention Scheme moves to the next stage, and the end of this funding is in sight.
As an alternative to running a full redundancy process, some people prefer to select specific employees without causing disruption to the whole workforce, so instead use a Settlement Agreement or COT3 Agreement to terminate their roles.
The difference between these is as follows:
Settlement agreements are contracts which stop employees bringing claims against their employers. Many different names and slang terms are used for them:
- Termination agreements
- Compromise agreements
- Gagging clauses
- Mutually-agreed resignation
- Ex-gratia payments
- Golden handshakes
The proper legal term, however, is ‘Settlement Agreement’.
The alternative to these lengthy legal agreements, is to work with ACAS (Advisory, Conciliation and Arbitration Service) and use a COT3 agreement. These are also legally binding contracts entered into between an employer and employee to settle actual or potential complaints to the Employment Tribunal, such as those arising from ‘selective redundancy’.
COT3’s provide the same protective outcome and similar terms as the more orthodox settlement agreements but with some real benefits for employers:
- They are quicker and much cheaper
- They don’t appear as daunting to employees, so staff are more willing to engage
- They are still legally binding
- The process starts with a “Protected Conversation” which is inadmissible in court
- The employee does not need to get legal representation.
How is it done?
The process is quite straight forward, providing you use the correct wording.
- A protected offer is made to the employee
- The intentions to engage in a COT3 are registered with ACAS
- The COT3 wording is sent to ACAS
- The employer fulfils the agreed terms.
THSP work with many customers to arrange COT3 agreements by helping them manage this process. If this is something you would like to hear more about then call us, on 03456 122144 and speak to one of our employment lawyers.