Redundancy- regarding "payment in lieu of notice"

NoreenOMS

Hi, I am hoping someone may be able to offer some advice..

My husband is soon to be made redundant. The query we have is in relation to whether "payment for notice in lieu" should be taxable or not. From the various goverment websites etc I have read regarding this, it suggests that it is only taxable if there is a clause in your contract advising it is taxable, or whether it could be considered that this situation is a regular occurance.

I asked my husband to raise this with his employer, and they came back to say taxable as per his contract. However, my husband is sure that the only documentation he was given when he started was an employee handbook, and there is nothing in there regarding "payment in lieu of notice". And given that his employer is claiming that this is the first time they have made redundancies, I dont think it could be considered that this is a regular occurance in his place of work- and therefore cannot be assumed that it is automatically taxable.

If his employer will not give him a copy of said contract with this clause (have not asked yet, but difficult as husband on garden leave), can anyone suggest where we go from here?

Thanks!

cazziebo

It's not about redundancies being a regular occurence, it's about what the contractual notice is in the contract, opposed to notice actually given as part of redundancy. (sorry, clumsy way to say it)

If someone is contracted to four weeks notice, but is actually given eight weeks as part of the redundancy package, then that payment in lieu of notice is tax free.

SandC

I think he should ask to see the details of his contract. It's not unusual for an employee to no longer have these things to hand. I think it's one of those things that isn't taken much notice of until a situation like this occurs. Often it's discretionary even if the contract sets out as his employer has said.

I received three months pay in lieu of notice totally tax free, but I recall that my contract/handbook never made any mention of anything other than notice periods, nothing about any payment.

Let us know how he gets on.

Liz_the_Whizz

The key thing with pay-in-lieu of notice (PILON) is whether the employer has set this (ie paying PILON) down as an option in the employment contract, or associated terms and conditions etc.

If they have, then it is taxable. If it is not specified, it is not taxable as it is regarded as a compensation payment for not letting the employee work out his/her notice - in effect, this is a breach of contract by the employer which they mitigate by paying PILON.

Ask the employer to produce the relevant documentation.

rlc_2

I'm being made redundant shortly - our Personnel department have secured our PILON as being non-taxable - something for which I'm very grateful.

You need to tak to them I think sine they are the ones who inform the IR of you contractual terms and consequent tax liability.

NoreenOMS

Hi,

thank you very much to all of you who have replied- I really do appreciate it, and I have taken all of your advice on board. My husband his work to request a copy of his contract, so will await receipt of that, and let you know what it says.

Thanks!

LittleVoice

If he is on garden leave then that is part of his notice period as he is an employee during that time. How much less than his contractual notice has he received. That is, when was he told his employment was definitely terminating, how much notice was he entitled to receive, when will be his last day of employment.

NoreenOMS

Hi LittleVoice,

From what he can remember, his standard notice is 2 weeks. But the notice he is being given is 9 weeks- one week for each years service, and that starts from the date he is officially redundant which is in a few days time, and was told this would be the case a few days ago when he was put on garden leave. Although they were told about the possiblity of redundancies at the end of last month- so think the company has gone down the lines of 30 day consultation.

Sorry to be vague ref dates etc, but would rather keep the personal details to a minimum where poss.


Thanks for your reply.

NoreenOMS

Hi, ok- here's an update- My husband has received the contract in the post. It is a revised version- the version was revised 3 years ago, and my husband and myself are sure he was never advised of this, never received a copy of this or asked to sign to agree to the revised terms.. but here is what it states ref notice:

"You are required to give the comapny one weeks notice if you are considering leaving our employment. Except in circumstances justifying immediate dismissal the notice we will give to you is as follows:" . It then proceeds to give the notices periods..

It then states: " The company reserves the right to pay salary in lieu of this notice.
(See Termination of Employment) ".

There is no supporting document, so we can only imagine that this would be referring to the handbook my husband has- and in there it does not state anything about payment of notice.

Can anyone offer any advice as to where we stand?, and how we should take this issue forward?

Thanks.

LittleVoice

Hi,

With 9 completed years of service, he has a statutory right to a minimum of nine weeks' notice from his employer. So that is correct.

If "The company reserves the right to pay salary in lieu of this notice" then it is indeed contractual and taxable.

NoreenOMS

Hi LittleVoice, thanks for advising that. Do you know a website or anything that I can refer to, to confirm that is the case? The statements I have seen so far only seem to state that it is taxable if it spells out that it is taxable. Also, do you know where we would stand in that my husband does not believe that this change in terms was provided to him?