Redundancy payment after pension age
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D1zzy
Posts: 1,500 Forumite
My OH finds herself in a unique situation within her company and your thoughts would be appreciated -apologies for the long post
She was advised last month, that she will be made redundant later this year. However, the blue chip company for which she works is struggling to work out a redundancy payment for her that does not breach discrimmination regulations.
Although not contractual the company has traditionally given a disgressionary payment = 1 months salary for every year worked. However this is capped so that the payment does not exceed the amount that would have been paid in salary upto pension age which is 60. ( At least that's what we believe - the actual formula used is not made public)
So say -30 years service , redundancy at 58 - 30 months pay due but capped at 24 months.
Simplistic Formula for someone age 58 with 30 years service
payment = [(60-58) x 12 x monthly salary]
The problem arises because OH decided to work on a part time basis beyond pension age age so she is 63 and under current legistation can work til 65 but the company pension age is still 60
The formula then gives a -ive ie in theory she should pay them
payment = [(60-63) x12 x monthly salary]
{Although the payment is "discressionary" we understand that as it has been traditionally paid in this way for many years that it is in fact contractual}.
We believe the company is anxious not to disadvantage OH nor to disadvantage other staff by giving her a payment based on her planned "leaving age" 65. -
( On this basis - she has actually for worked 40 years at age 63 so would be entitled to 40 months capped to 24 months).
I suppose they could change the basis of payment from pension age to 65, but that would be costly when most people may not be planning to work beyond pension age; or say no redundancy payments beyond statutory levels for those beyond pesion age, but that would be discriminatory; or change the pension age to 65, but that would have huge consequences and no chance of implementing that before she goes.
An unforseen consequence of the legislation allowing people to work beyond retirement age I guess!
She was advised last month, that she will be made redundant later this year. However, the blue chip company for which she works is struggling to work out a redundancy payment for her that does not breach discrimmination regulations.
Although not contractual the company has traditionally given a disgressionary payment = 1 months salary for every year worked. However this is capped so that the payment does not exceed the amount that would have been paid in salary upto pension age which is 60. ( At least that's what we believe - the actual formula used is not made public)
So say -30 years service , redundancy at 58 - 30 months pay due but capped at 24 months.
Simplistic Formula for someone age 58 with 30 years service
payment = [(60-58) x 12 x monthly salary]
The problem arises because OH decided to work on a part time basis beyond pension age age so she is 63 and under current legistation can work til 65 but the company pension age is still 60
The formula then gives a -ive ie in theory she should pay them
payment = [(60-63) x12 x monthly salary]
{Although the payment is "discressionary" we understand that as it has been traditionally paid in this way for many years that it is in fact contractual}.
We believe the company is anxious not to disadvantage OH nor to disadvantage other staff by giving her a payment based on her planned "leaving age" 65. -
( On this basis - she has actually for worked 40 years at age 63 so would be entitled to 40 months capped to 24 months).
I suppose they could change the basis of payment from pension age to 65, but that would be costly when most people may not be planning to work beyond pension age; or say no redundancy payments beyond statutory levels for those beyond pesion age, but that would be discriminatory; or change the pension age to 65, but that would have huge consequences and no chance of implementing that before she goes.
An unforseen consequence of the legislation allowing people to work beyond retirement age I guess!
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Comments
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Some thoughts.
Under these rules she gets nothing.
This formula may actually breach the redundancy rules since it can make payments below the stat. min redundancy payments
http://www.berr.gov.uk/whatwedo/employment/employment-legislation/employment-guidance/page33157.html
With 40 years service the minimum is 30 weeks @ £250pw.
Thinking about it since the upper limit was removed on stat with the 2006 changes this should have been sorted out by now for this companies enhanced payments and the current formula may be discrimitory allready for those up to 60.
They need to understand what rule has been broken and how and then fix it,
If she took her pension can't they just say she is retired so no further payments are due, if it has been defered then that may change things.
perhaps they should consider a phased increase from 60-65 for the upper limit calculation to target any changes in the normal retirement dates.
Could they not offer a comprimise agreement to avoid a claim, I am sure they can come up with something agreeable.
I think the key here may be did she take the pension or not?
Not sure how that would effect a stat payment, any one know?
I would have a google for public body policies on redundancy payment for retirement age people this may give some clue how others have handled it. To be in line with the way Stat is done this clawback would not happen.0 -
She did take her pension. But there is so far nothing in the rules to say "no disgressionary redundancy pay if you've taken yr pension" - and as those who work beyond retirement age are supposed to be treated like everyone else, I think that would be discriminatory.
Basically their scheme does not yet handle those working beyond pension age.
Receiving statutory as a minimum is I think not an issue - but who knows0 -
Here is a link to how the NHS system proposed to handle this
http://www.unison.org.uk/file/A3748.pdf
it covers some of the discriminatory issues.
It was complicated since it combined early retirement benifits
Not sure if this was the final result but gives an idea behind the thinking.
From reading this I would think the current scheme at the OH place should have been changed allready capping should not be in place at all unless it applies to all.
Anyone that has been made redundant since the legislation came in probably has a claim if their payment was reduced.(time limits on claims).
this link covers an aspect of retirement/pension with a key point.
http://www.nhsemployers.org/PayAndContracts/NHSRedundancyReview/RedundancyArrangements/BriefingTheRightApproach/Pages/Ret_RedBriefingPitfalls.aspx#14
The recomendation is that a break in employment happens to avoid the continuity of employment.
Did the OH take the pension without taking a break?
google ( age discrimination redundancy ) throw up loads of links.
I think she may have a claim for the full discretionary amount if there was no break in employment at retirement.
The down side if you try to go for this is she may not be made redundant and I think they can stop her working at 65 which would be cheaper.0 -
Thanks -however I know know that our assumtions about the formula were wrong.
What happens is that for those approaching retirement age the enhanced redundancy payment (max 36 months) is offset against the pension - so I 'll start another thread and be more specific0
This discussion has been closed.
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