Mutual Separation Agreement

[Someotherusername]

Hi all. Using a new username here as I don’t want to be identifiable. Out of nowhere (genuinely) I have been invited to explore a mutual separation between myself and my employer. Having not been through this before I was wondering if anyone had any advice they could offer. I’ll try and keep the information useful but not too detailed as I don’t want to prejudice anything.

Employee for several years, spotless review record, received review in top 10% of company at most recent review. Received pay rise in most recent review.

Appears this is a non-personal cost cutting exercise. It is likely my role will be replaced in a lower cost country.

I have been given the choice to engage in this process or carry on as before. I’m not sure that carrying on as before is really an option as I’m not sure how the relationship can reasonably be expected to continue now. I also believe from my contract terms that I can be fired for any reason and given my contracted notice period. I assume they are offering this option to close out any potential legal challenge to my dismissal by paying me to waive that right.

For those of you who have experience of this; I’m wondering the best way to approach it. I don’t yet know what the offer will be, but intend to find in order to make a decision. However it doesn’t sound like I really do have a choice as mentioned above.

What I want is to make sure that if I go down this route, that I maximise the outcome financially for me, as well as preserve my dignity to whatever degree is possible. I’ve been explicitly told this is nothing to do with my performance, just that the company needs to reduce costs.

Sorry if that’s a bit of a ramble. It’s come as something of a surprise and I’m trying to work out how to approach it. Young family and main earner so it’s potentially going to be painful.

[Muzzer79]

Someotherusername said:

I also believe from my contract terms that I can be fired for any reason and given my contracted notice period.

Do you have a UK based contract?

Because if you do, with several years service, they cannot just fire you for any reason and if they could, they’d probably have done so.

[Super Sonic]

They want to make redundancies without making redundancy payments.

[fat80b]

First. It’s not personal no matter how much it might feel as it is. You may find yourself going through various emotions as you go through the process, but the reality is that you need to focus on getting the best outcome for yourself here.

If you’ve been with them more than 2 years, you have some rights and can negotiate, less than 2, they can get rid of you for almost any reason so take whatever they offer.

You’ll need a solicitor to review the settlement agreement - the company will probably offer some amount of money to cover the legal costs. Often they’ll try and get away with £250 to cover it, it won’t. You need at least 500 and probably nearer a grand to pay for a proper review. I used Richard Moon of Blythe Liggins and would recommend.

Then it’s really all about negotiation. Can you get more money out of them, can you get it as redundancy and not salary, can you keep your laptop, what do you do with holiday, can you get an agreed reference etc.

If there are others in the same boat, speak to them and share information- there’s some power in knowing what others are being offered.

[Fastdruid]

IANAL but AIUI a "Mutual Separation Agreement" is something that can be used in lieu of of redundancy.

It's voluntary, ie you don't *have* to sign but on the other side of that coin the employer has to make the terms better than redundancy.

I think you probably have to accept that your time there is over, either go willingly, have redundancy or otherwise be pushed out the door so it's best to get as much as you can and as good terms as you can.

It may be worth a "protected conversation" (google it but essentially it's an "off the record" conversation between employer and employee that cannot be used in an tribunal) to see where you really stand.

The starter for pay out would be to work out what your statutory redundancy pay would be ( https://www.gov.uk/calculate-employee-redundancy-p... ) vs what an an unfair dismissal tribunal may award (a google suggests about 6 months salary) and go from there. For example https://www.masonbullock.co.uk/settlement-agreemen...

[fat80b]

In terms of money, if it’s a decent company / tech firm etc, then you might get something like 1 or even 2 months salary per year served and if they class it as redundancy, the first 35k is tax free. This can be on top of your notice period ( 3 months or whatever it is)

I’ve seen plenty of people walk away with 20 months of pay as a lump sum! So it might not be all bad.

If not, you might be looking at government minimums which is pretty rubbish. Plus notice plus holiday etc.

Again, knowing what other companies in your sector have done, what others in your company have got all helps in the negotiation

[dudleybloke]

Sounds like they want to make you redundant but not pay you any redundancy.

[Gargamel]

dudleybloke said:

Sounds like they want to make you redundant but not pay you any redundancy.

Ignore this.

Typically I use Mutual Seperations for several reasons. Specifically in taking the money it is compensating you for giving up your employment contract and any claims you may have against the company.

The company then doesn’t have to count you as toting up for redundancy numbers, nor do they need to run a performance review (though sounds like here that would be irrelevant).

Usually I calculate notice plus stat redundancy and we honour all bonuses, holiday etc. Rarely do we need to go beyond that, however sometimes we might add a month or two on top if it allows the person to move on more easily.

It’s an easy and painless way for employers to move people on and sidestep process. For people it should mean no less cash than redundancy as a minimum and full notice period.

[Jasandjules]

Someotherusername said:

For those of you who have experience of this; I’m wondering the best way to approach it. I don’t yet know what the offer will be, but intend to find in order to make a decision. However it doesn’t sound like I really do have a choice as mentioned above.

First thing to consider is how quickly and easily can you find another job?

[Someotherusername]

Thanks for all the replies so far, and sorry for the slow response. Seems as a new member you can only post at certain times of the day, so I’m hoping in the time it has taken to write this, I’ve not missed the window!

Muzzer79 said:

Do you have a UK based contract?

Because if you do, with several years service, they cannot just fire you for any reason and if they could, they’d probably have done so.

UK based contract, been there over two years. So hopefully that improves my bargaining position.

fat80b said:

First. It’s not personal no matter how much it might feel as it is. You may find yourself going through various emotions as you go through the process, but the reality is that you need to focus on getting the best outcome for yourself here.

If you’ve been with them more than 2 years, you have some rights and can negotiate, less than 2, they can get rid of you for almost any reason so take whatever they offer.

You’ll need a solicitor to review the settlement agreement - the company will probably offer some amount of money to cover the legal costs. Often they’ll try and get away with £250 to cover it, it won’t. You need at least 500 and probably nearer a grand to pay for a proper review. I used Richard Moon of Blythe Liggins and would recommend.

Then it’s really all about negotiation. Can you get more money out of them, can you get it as redundancy and not salary, can you keep your laptop, what do you do with holiday, can you get an agreed reference etc.

If there are others in the same boat, speak to them and share information- there’s some power in knowing what others are being offered.

Thanks for this, I have sent a message to Blythe Liggins to see about an exploratory chat. My main goal is to maximise the financial side and minimise how much longer I’m expected to perform active duties. I’d also like to ensure a positive reference although my impression these days is that companies tend to only confirm dates of employment rather than anything more specific.

Fastdruid said:

IANAL but AIUI a "Mutual Separation Agreement" is something that can be used in lieu of of redundancy.

It's voluntary, ie you don't *have* to sign but on the other side of that coin the employer has to make the terms better than redundancy.

I think you probably have to accept that your time there is over, either go willingly, have redundancy or otherwise be pushed out the door so it's best to get as much as you can and as good terms as you can.

It may be worth a "protected conversation" (google it but essentially it's an "off the record" conversation between employer and employee that cannot be used in an tribunal) to see where you really stand.

The starter for pay out would be to work out what your statutory redundancy pay would be (link) vs what an an unfair dismissal tribunal may award (a google suggests about 6 months salary) and go from there. For example link

There have been redundancies in the business recently and my understanding was that it was all done at the bare minimum legally, which doesn’t fill me with hope for the opening offer. That said, they have admitted the job isn’t redundant, so would think that might put them in a difficult position to call it so, and thus the offer needs to be better. I’d think I’d have a case in a tribunal so if the logic is that it’s making that go away for them, it has to be (in my mind at least) sufficiently better to make it appealing?

fat80b said:

In terms of money, if it’s a decent company / tech firm etc, then you might get something like 1 or even 2 months salary per year served and if they class it as redundancy, the first 35k is tax free. This can be on top of your notice period ( 3 months or whatever it is)

I’ve seen plenty of people walk away with 20 months of pay as a lump sum! So it might not be all bad.

If not, you might be looking at government minimums which is pretty rubbish. Plus notice plus holiday etc.

Again, knowing what other companies in your sector have done, what others in your company have got all helps in the negotiation

It is a tech firm. My experience so far (albeit for redundancy) is they pay the least legally they can in a given country. 20 months as a lump sum would make this palatable though for sure.

Gargamel said:

Ignore this.

Typically I use Mutual Seperations for several reasons. Specifically in taking the money it is compensating you for giving up your employment contract and any claims you may have against the company.

The company then doesn’t have to count you as toting up for redundancy numbers, nor do they need to run a performance review (though sounds like here that would be irrelevant).

Usually I calculate notice plus stat redundancy and we honour all bonuses, holiday etc. Rarely do we need to go beyond that, however sometimes we might add a month or two on top if it allows the person to move on more easily.

It’s an easy and painless way for employers to move people on and sidestep process. For people it should mean no less cash than redundancy as a minimum and full notice period.

I am due to miss out on about 60% of my overall variable portion of my pay due to the timing. Being paid the remainder of my OTE tax free (or at least partly) in a settlement figure could be a useful and arguably reasonable starting point.

Jasandjules said:

First thing to consider is how quickly and easily can you find another job?

Honestly I’ve no idea. I don’t want to reveal my position at this point but it’s not a common one in the industry. So I will need to think carefully about how I position myself based on my experience and any future jobs. My gut says it won’t be a quick process. So I want to be covered for as long as possible. If I manage quicker then all the better obviously.

[Jasandjules]

Someotherusername said:

Honestly I’ve no idea. I don’t want to reveal my position at this point but it’s not a common one in the industry. So I will need to think carefully about how I position myself based on my experience and any future jobs. My gut says it won’t be a quick process. So I want to be covered for as long as possible. If I manage quicker then all the better obviously.

Ok then this is a major factor in the amount that can be considered reasonable to take the money and run. And what delaying tactics you might want to consider.

A fair amount will depend upon their starting position (which as you have no agreement yet nor any discussions on the actual sums will be the fundamental question). You then have to consider what costs there are to them - for example, you can hint and not accepting anything, appealling any redundancy etc which will be time and cost intensive for them to process.... But that will depend on how you view their position against your own.

The niche role etc is a further bargaining chip. I usually also try (if acting for an employee) to get other things thrown in - car allowance, if you have phones/laptops and whatnot.. If you an e-bike or other company incentive, that kind of thing... Just anything you can think of to throw into the pot because you have one opportunity to get as much as you can. Assuming they are up for a barter and it is not a take it or leave it.....

I sound pessimistic in terms of the "get as much as you can" I realise, but in my view once a company has started these discussions, you have been selected, the only question is to be how and when you go. Genuine redundancy or otherwise... Sorry to be blunt but best to be realistic IMHO and the soonest you are job hunting the better. On that note, ask for a copy of a template agreement ASAP - I say that because some have clauses that require you to warrant you have not been offered another job yet - so you need to ensure that is the case before you sign.....

[Someotherusername]

Jasandjules said:

Ok then this is a major factor in the amount that can be considered reasonable to take the money and run. And what delaying tactics you might want to consider.

A fair amount will depend upon their starting position (which as you have no agreement yet nor any discussions on the actual sums will be the fundamental question). You then have to consider what costs there are to them - for example, you can hint and not accepting anything, appealling any redundancy etc which will be time and cost intensive for them to process.... But that will depend on how you view their position against your own.

The niche role etc is a further bargaining chip. I usually also try (if acting for an employee) to get other things thrown in - car allowance, if you have phones/laptops and whatnot.. If you an e-bike or other company incentive, that kind of thing... Just anything you can think of to throw into the pot because you have one opportunity to get as much as you can. Assuming they are up for a barter and it is not a take it or leave it.....

I sound pessimistic in terms of the "get as much as you can" I realise, but in my view once a company has started these discussions, you have been selected, the only question is to be how and when you go. Genuine redundancy or otherwise... Sorry to be blunt but best to be realistic IMHO and the soonest you are job hunting the better. On that note, ask for a copy of a template agreement ASAP - I say that because some have clauses that require you to warrant you have not been offered another job yet - so you need to ensure that is the case before you sign.....

Thanks. I fully accept that a lot of this is academic until I know where I’m starting from in terms of their opening offer. I can also read between the lines in that this is happening and I’ve been selected, so whether it is now or via some other route I’m out. I won’t give any opinions on how I feel about all this at this point but accept those starting assumptions. I do feel like I’m in a reasonable position in terms of my HR record from a performance perspective.

I am keen to see the agreement and will read it thoroughly. Thanks for the pointers. I am in no doubt however that my objective is to get as much as I can, I will genuinely need the most I can to ensure this doesn’t affect my family by having as much paid up time as possible to find another role. I’m determined not to spend savings keeping us afloat, so they need to pay whatever I can get.

[2 GKC]

fat80b said:

In terms of money, if it’s a decent company / tech firm etc, then you might get something like 1 or even 2 months salary per year served and if they class it as redundancy, the first 35k is tax free. This can be on top of your notice period ( 3 months or whatever it is)

I’ve seen plenty of people walk away with 20 months of pay as a lump sum! So it might not be all bad.

If not, you might be looking at government minimums which is pretty rubbish. Plus notice plus holiday etc.

Again, knowing what other companies in your sector have done, what others in your company have got all helps in the negotiation

£30k tax free isn’t it?

[Gargamel]

2 GKC said:

fat80b said:

In terms of money, if it’s a decent company / tech firm etc, then you might get something like 1 or even 2 months salary per year served and if they class it as redundancy, the first 35k is tax free. This can be on top of your notice period ( 3 months or whatever it is)

I’ve seen plenty of people walk away with 20 months of pay as a lump sum! So it might not be all bad.

If not, you might be looking at government minimums which is pretty rubbish. Plus notice plus holiday etc.

Again, knowing what other companies in your sector have done, what others in your company have got all helps in the negotiation

£30k tax free isn’t it?

A mutual agreement is not redundancy though, so no part of it is tax free.


Also if you have a non compete clause in your contract, make sure it is waived as part of the agreement.

[Cotty]

Someotherusername said:

Appears this is a non-personal cost cutting exercise. It is likely my role will be replaced in a lower cost country.

I have been given the choice to engage in this process or carry on as before. .

With the company I worked for it was Mumbai. They wanted to send me down there for a month to train them so they can take my job, I declined the invitation and moved to another company before I was pushed.

[Vee]

One thing that may or may nor be a factor for you, in larger companies the budget to payoff is often somewhere like exceptionals and so is much more flexible, they just need to get the operational savings showing.
I've seen companies willing to pay off someone that is going to retire in the next 3 months anyway in order to get the exceptional cost booked at year end and the operational saving shown for the full year. The payoff was a lot higher than the 3 months salary they would have otherwise had to incur.

[Someotherusername]

Gargamel said:

A mutual agreement is not redundancy though, so no part of it is tax free.


Also if you have a non compete clause in your contract, make sure it is waived as part of the agreement.

Is that the case? I was hoping I’d be looking at some of it tax free. Guess I will have to double the amount I want then!

Good point re the non compete, thank you.

[Someotherusername]

Cotty said:

With the company I worked for it was Mumbai. They wanted to send me down there for a month to train them so they can take my job, I declined the invitation and moved to another company before I was pushed.

Lovely!

I’ll be gone I imagine before they even get the position advertised, given the time things take.

[Someotherusername]

Vee said:

One thing that may or may nor be a factor for you, in larger companies the budget to payoff is often somewhere like exceptionals and so is much more flexible, they just need to get the operational savings showing.
I've seen companies willing to pay off someone that is going to retire in the next 3 months anyway in order to get the exceptional cost booked at year end and the operational saving shown for the full year. The payoff was a lot higher than the 3 months salary they would have otherwise had to incur.

This is an interesting point that I hadn’t considered, thank you.

[Jasandjules]

Gargamel said:

A mutual agreement is not redundancy though, so no part of it is tax free.


Also if you have a non compete clause in your contract, make sure it is waived as part of the agreement.

Makes no real difference, you have a Loss of Employment and a payment can be made ex gratia after any PENP... and thus tax free under S401 (IIRC).