Coronavirus is having a serious impact on businesses and the global economy. Sadly, many businesses have been impacted to the extent that they have or will have to put cost-cutting measures in place, particularly when the Coronovirus Job Retention Scheme (CJRS, or furlough scheme) comes to an end. For some individuals this will result in their role being put at risk of redundancy.
When senior executives are made redundant, there is typically no redundancy process and very little consultation.
Below is a list of top tips to help protect your position and maximise your exit package:
As part of the redundancy consultation process, you have the right to ask questions about the reasons for the proposed redundancy, the justiﬁcation for it and alternative measures (including furlough, whilst it is still available) that have been considered in order to avoid it. During this exercise, it is important to gather information in order to determine whether this is a genuine redundancy situation, or an attempt to disguise an ulterior motive for termination of employment such as poor performance or misconduct.
If it is a ‘sham redundancy’ then, depending upon the real reason for the dismissal, you might have grounds to bring a claim, such as unfair dismissal, discrimination or whistleblowing.
Levers to increase settlement?
Have you previously raised a grievance or blown the whistle, and is your employment being terminated because of this? Have you been selected for redundancy for a discriminatory reason? If so, you may have potentially valuable claims which should not be compromised without signiﬁcant ﬁnancial recompense.
Further, a fair dismissal for poor performance (for example) involves a much longer termination process than a redundancy exit, during which time you would continue to accrue salary, annual leave, bonus, equity and beneﬁts. This loss should be factored into a settlement negotiation.
Check the termination provisions in your employment contract. How long is your notice period? Can you go on garden leave or receive a payment in lieu of notice? Even if your contract is silent, you could negotiate these points with your employer. Going on garden leave is often attractive, as it buys you time to ﬁnd a new role whilst still employed and in most cases the period of your restrictive covenants will run from the start of your garden leave period rather than your termination date.
If you are likely to ﬁnd a new role quickly, you might prefer to receive a payment in lieu of notice which would enable you to start your new role immediately (subject to your restrictive covenenants).
Where ﬂexibility is required, it might be favourable to agree to go on garden leave with the option of bringing forward the termination date and receiving a payment in lieu of notice (and benefits) in respect of the remainder of your notice period.
Does your employment contract contain restrictive covenants? What impact might they have on any new role which you are considering? You may be able to negotiate a shorter restrictive period, narrow the wording of the restrictions, or a waiver of them in part or full.
Review your equity plan rules to ensure you understand what happens to your stake on termination. Are you a “good leaver”? There may be scope to negotiate your position, or to gain assurance that the Remuneration Committee will exercise their discretion in your favour. Ensure that anything agreed is clearly recorded in the settlement agreement.
Are you losing any bonus entitlement as a result of the redundancy? Are the terms of the bonus rules being complied with? You could seek to negotiate a pro rata bonus payment as part of the exit package equivalent to, for example, the portion of the bonus year you will have worked come your termination.
Consider negotiating the wording of internal and external announcements, in order to protect your reputation. Ensure those announcements are annexed to any settlement agreement and that there is a provision in the agreement to ensure your employer will not derogate from the agreed messaging.
There are many important considerations for senior executives when facing a potential redundancy and negotiating a severance package. We have a wealth of experience in negotiating exits, particularly in professional and ﬁnancial services, and can advise and support you in order to safeguard your future.