Top universities paid more than £15m in settlement agreements last year

Lawyers argue it may be a ‘price worth paying’ to avoid lengthy internal processes

The UK’s top universities paid out more than £15m for hundreds of settlement agreements in the last academic year, People Management can reveal. 

12 constituents of the Russell Group which responded to freedom of information (FOI) requests with full data for 1 August 2017 and 31 July 2018 – the dates which university accounts are usually drawn up to – paid a total of £15,266,846 to 511 staff under settlement agreements. Five further universities responded with details partially covering the accounting period, indicating they had also made notable payments. 

Of those universities which responded in full, the University of Manchester paid out the most under settlement agreements in 2017/18, with £3,547,211 paid to 110 staff. A university spokesperson explained these figures were “in the context of voluntary severance arrangements as a consequence of restructures and staffing reductions”. 

Cardiff University followed, having paid out £2,941,944 to 64 staff, including £2,750,112 under a voluntary severance scheme involving 53 people. The University of Southampton ranked third, paying out £2,138,631 to 70 staff, with the FOI response indicating the institution had undergone a restructuring exercise during that period. A spokesperson added the institution had "introduced voluntary arrangements in several areas at an enhanced level to avoid compulsory job losses" during the year.

Settlement agreements, which were known as compromise agreements until July 2013, have garnered an unflattering reputation. This is because they sometimes contain non-disclosure agreements (NDAs), or ‘gagging clauses’, potentially preventing staff from speaking out about bullying and harassment. It has been reported measures are currently being drawn up to ban such clauses. 

But in many cases, the universities disclosed neither the reasons for the payouts nor the terms of the settlements. Lawyers who spoke with People Management agreed there were several less controversial reasons for putting settlement agreements in place.

“At a time when students are paying very high fees, the level of payments being made under settlement agreements may appear somewhat excessive,” said Barry Stanton, partner and head of employment law at Boyes Turner. “However, what the raw data does not tell us is whether the payments include notice payments, as well as ex gratia payments, and takes no account of the time and expense and disruption that can come with disputes involving academics, which might involve prolonged disciplinary procedures or, in the event of restructuring exercises, arguments about whether academics can be made redundant.

“Given the disruption to teaching time, and the direct and indirect costs that may be incurred in managing internal processes and tribunals, the use of settlement agreements and the associated payments may well be a price worth paying to ensure that overall costs are minimised.”

Paul Holcroft, associate director at Croner, added: “Even where an employer has a fair reason for dismissal, such as a restructure or redundancy, and has followed a dismissal procedure, a settlement agreement may be used to reduce the risk of being taken to an employment tribunal. With fees being removed and tribunal claims increasing, settlement agreements may be seen as a method of ensuring there is no dispute once the relationship ends, even if both parties were happy with the conclusion of the relationship.”

People Management sent FOI requests for details of amounts paid under settlement agreements – and how many staff they were paid to – for the last four accounting years to all 24 Russell Group universities. Of those, 19 provided all or some of the details requested, which revealed those universities had paid out at least £61,553,782 under 2,434 settlement agreements during that time.

Of those which did not provide information, one university declined as the way its data was stored meant it would have taken more time than prescribed under FOI legislation to retrieve. Another declined on the grounds it would prejudice commercial interests. Three universities did not provide any information, despite multiple requests from People Management

The Liberal Democrats exposed similar information under FOI requests, as reported in The Guardian in December 2016. These revealed 48 universities had paid out £146m in severance payments to 3,722 people over the course of five years.