Been given notice today :-(

SoSad_4

Hi,

I´ve been working for my current employer since April 2008 and I was informed today, that I have to leave since the company is in financial troubles. I´ve got 3 months notice so, officially, my last day will be on 31 March 2010. Obviously, I am very sad about today´s announcement as it´s been not only a job I really liked but a very well paid job as well (70k p.a.).

Now, here´s something I´d like to ask you guys. My employer didn´t want to make me redundant but said that they are short of cash and that in order to prevent the worst from happening later on in 2010, they had to make some tough decisions now. But, and here comes the question, they mentioned to me that rather than paying me till the end of March they offered to to pay the Jan - March salary as a tax free redundancy payment and that, if I agreed to this, they would terminate the contract with effect of 31st December 2009.

Whilst I like the idea of getting financial support by receiving a tax free payment rather than 3 months of taxed monthly salaries, I am currently too confused and emotional to really understand the implications of the company´s suggestion. Don´t get me wrong, they did not try to convince me of anything in today´s meeting, they just mentioned this as an option "to help" me to cope better with the new situation in 2010.

Is this a trick? Is this legally ok? What would be the formal disadvantages for me if I agreed on such a "model"? Or is it indeed a great offer in a very difficult (financial) situation for me?

I´d be very grateful to hear your thoughts and comments on this. Thank you!

SoSad

ben500

Hm on the face of it it looks a good deal but as you say there may well be hidden complications to it, afraid I don't have a clue but good luck for the future anyway.

cappy1501

Hiya, so sorry about your news....hopefully you'll be able to find a job quickly.

I had a similar deal and although I can't really think now of implications of taking the lump sum versus working off your notice period there are couple of things you need to think about:

- do you really want to leave the firm (I know, sounds odd but will explain shortly),
- and what is happening with the rest of the firm?

Depending on how large the organisation is you can apply for other available internal jobs and they will have to consider you for them as long as you have similar skill set (and if necessary retrain you).

How many weeks of notice did you get? I don't meant the 3 months period - that's given because of your seniority (you're a manager, right?); there is usually a 2 weeks long consultation period when a person is considered for a redundancy. One thing that is important to understand is that with a redundancy the employer must give you an opportunity to fight for your job before they can officially tell you that you are going to be made redundant, e.g. allow you to suggest alternatives to redundancy such as a gardening leave, part-time work, job share, etc.. If they don't do that they're breaking the law.

I'm not a lawyer so can't really offer you all the details but I can send you links to lots of advice, just let me now.

The only other thing I can say is that from my experience no matter how nice the 'notice of redundancy' meeting is it is usually an 'HR speech' to ensure that the company is covered so that they're not sued for unfair dismissal. If your employer is genuinely nice and helpful that's fantastic though!

dickydonkin

SoSad wrote: »

Hi,

I´ve been working for my current employer since April 2008 and I was informed today, that I have to leave since the company is in financial troubles. I´ve got 3 months notice so, officially, my last day will be on 31 March 2010. Obviously, I am very sad about today´s announcement as it´s been not only a job I really liked but a very well paid job as well (70k p.a.).

Now, here´s something I´d like to ask you guys. My employer didn´t want to make me redundant but said that they are short of cash and that in order to prevent the worst from happening later on in 2010, they had to make some tough decisions now. But, and here comes the question, they mentioned to me that rather than paying me till the end of March they offered to to pay the Jan - March salary as a tax free redundancy payment and that, if I agreed to this, they would terminate the contract with effect of 31st December 2009.

Whilst I like the idea of getting financial support by receiving a tax free payment rather than 3 months of taxed monthly salaries, I am currently too confused and emotional to really understand the implications of the company´s suggestion. Don´t get me wrong, they did not try to convince me of anything in today´s meeting, they just mentioned this as an option "to help" me to cope better with the new situation in 2010.

Is this a trick? Is this legally ok? What would be the formal disadvantages for me if I agreed on such a "model"? Or is it indeed a great offer in a very difficult (financial) situation for me?

I´d be very grateful to hear your thoughts and comments on this. Thank you!

SoSad

Is this a trick? Only time would tell.

Is this legally ok? Very unlikely.

As you have only worked for the company since April 2008, the reality is that you would not be entitled to any redundancy payment as you are required to work for two complete years for this payment.

I am also surprised of the 'three months notice' you have been given due to the short period you have worked for the company. If the company are struggling financially as you suggested, why would they pay something any longer than they have to, although this could possibly be due to contractual obligations.

In addition, the company is willing to pay you the monthly equivalant of your £70,000pa salary as redundancy when the maximum legal amount is only £380.00 for every years service (depending on age), although, as stated earlier, you are not entitled to any redundancy payments due to your short service.

I am sure there will be tax implications. It seems a bit suspicious to me and I would suspect that the company would not be willing to put such terms in writing.

Are the company willing to put into writing that you have been made redundant? - this is vital should you need to claim mortgage protection/loan insurance etc and also you may need to prove redundancy to any benefit agency you may claim from.

If this offer is genuine, I would tread carefully - sure, the money may be helpful in the short term, but there could be serious implications going forward if HMCR get wind of the 'deal'.

MrsTinks

Have you asked ACAS?

briona

Great post dpassmore!

To the OP, as you are not entitled to statutory redundancy pay (by virtue of not having been there for two full years), I think this payment would be classed as a compromise agreement. Having had some experience of compromise agreements (I did a lot of research when a friend was presented with one), a couple of things come to mind:

1. A compromise agreement is in effect the mutual termination of employment, in other words, a nicer term for 'sacking'. If you are sacked, and need to claim benefits, you will be sanctioned for up to 26 weeks, which might prove problematic if you need to claim mortgage interest support for example. In my friend's case (not that he's needed to claim anything), his employment solicitor insisted on adding a clause to state that this was an "enhanced redundancy package" rather than a "compromise agreement". Unfortunately since you're not entitled to statutory redundancy pay, having such a clause added would not help you.

2. A point included in all (?) compromise agreements is that in the event of HMRC needing to claim unpaid tax on the sum you receive, YOU would be personally liable. If the company pays you three months' untaxed salary, they will be shortchanging HMRC by almost £1,500pm. By the time they notice this, it could be up to 6 years later and who knows what your circumstances will be? Unfortunately though, you will still be liable for that £4,500...

3. Finally, if you don't some kind of agreement in writing, I think you could be done for tax evasion (although whether anything serious would happen over £4,500 is another matter). You would have little defence if you knowingly accepted – and failed to declare – untaxed income.

Briona

Note that I am a graphic-designer-turned-EFL-teacher NOT an employment solicitor!

dickydonkin

do you really want to leave the firm (I know, sounds odd but will explain shortly),

The OP has made it abundantly clear that he doesn't - but it seems he has no choice.

Depending on how large the organisation is you can apply for other available internal jobs and they will have to consider you for them as long as you have similar skill set (and if necessary retrain you).

The size of the organisation is irrelevant and does not preclude from applying from any reasonable alternative positions within the company.

How many weeks of notice did you get? I don't meant the 3 months period - that's given because of your seniority (you're a manager, right?);

The legal minimum notice is one week if the employee has been employed by the employer continuously for one month or more, but for less than two years.
Two weeks' notice if the employee has been employed by the employer continuously for two years, and one additional week's notice for each further complete year of continuous employment, up to a maximum of 12 weeks, however, the position of the employee is irrelevant.
Contracts of employment may have enhanced variations of the minimum requirements.

there is usually a 2 weeks long consultation period when a person is considered for a redundancy

.
For redundancies of less than 20,(which seems to be the case here) there is no defined period of consultation, however, meaningful consultation has to take place with the affected person until redundancy can be confirmed or otherwise.

One thing that is important to understand is that with a redundancy the employer must give you an opportunity to fight for your job before they can officially tell you that you are going to be made redundant, e.g. allow you to suggest alternatives to redundancy such as a gardening leave, part-time work, job share, etc.. If they don't do that they're breaking the law.

Garden leave is not an alternative to redundancy. This usually occurs when an affected employee has been provisionally selected for redundancy and is given 'garden leave' until the redundancy procedure has been concluded.

cappy1501

dpassmore wrote: »

Is this a trick? Only time would tell.

Is this legally ok? Very unlikely.

As you have only worked for the company since April 2008, the reality is that you would not be entitled to any redundancy payment as you are required to work for two complete years for this payment.

I am also surprised of the 'three months notice' you have been given due to the short period you have worked for the company. If the company are struggling financially as you suggested, why would they pay something any longer than they have to, although this could possibly be due to contractual obligations.

In addition, the company is willing to pay you the monthly equivalant of your £70,000pa salary as redundancy when the maximum legal amount is only £380.00 for every years service (depending on age), although, as stated earlier, you are not entitled to any redundancy payments due to your short service.

I am sure there will be tax implications. It seems a bit suspicious to me and I would suspect that the company would not be willing to put such terms in writing..

Couple of clarifications: I think you are correct about the ineligibility for the basic redundancy pay (since the OP worked for less then 2 years) but perhaps it's something that the employer can still decide to count in to the final pay off if they choose to? I don't know the rules about this particular aspect..... However, I think what the OP will be getting is the payment in lieu of notice, and that payment will be contractually based (already mentioned in her contract). Which means that even if OP worked for a short period of time if their contract says (and the board members of the firm have decided that certain internal redundancy rules will apply) that they'll be given 3 months notice, - than the firm can offer to pay the lump sum of that notice, instead of asking the employee to work off that period.

And yes, that payment is indeed tax free. The firm will use a specific tax code that will ensure that it is so and that the OP will not have any problems in the future. I can't remember the exact amount that is the max that can be tax free but it might be in the region of £16,000.

All this has to be documented in the notice of redundancy letter, and I would still urge the OP to have a look through some help guides available on the net. I know that it's very upsetting time but it's better to know what to do!

SoSad_4

cappy1501 wrote: »

Hiya, so sorry about your news....hopefully you'll be able to find a job quickly.

Thank you, cappy1501.

cappy1501 wrote: »

Depending on how large the organisation is you can apply for other available internal jobs and they will have to consider you for them as long as you have similar skill set (and if necessary retrain you).

The company employs roughly 40 people. When you say "they will have to consider" me for other available jobs, I wonder how I could prove availability (they are non advertised at the moment, at least) and combined with the financial situation the company is in, I wonder if they wouldn´t fight this application to the end.

cappy1501 wrote: »

How many weeks of notice did you get? I don't meant the 3 months period - that's given because of your seniority (you're a manager, right?); there is usually a 2 weeks long consultation period when a person is considered for a redundancy.

Well, my employment contract says that I´ve got 3 months notice period (yes, I work in Management as you said), but as for the consultation period, no such thing has happened. My boss and CEO asked me for a meeting earlier this afternoon and then he told me about the redundancy. That´s all!

cappy1501 wrote: »

One thing that is important to understand is that with a redundancy the employer must give you an opportunity to fight for your job before they can officially tell you that you are going to be made redundant, e.g. allow you to suggest alternatives to redundancy such as a gardening leave, part-time work, job share, etc.. If they don't do that they're breaking the law.

Oops, I wasn´t aware of that! And neither was my boss, it would seem. As I wrote above, he called me in and broke the news. If that constitutes a break of the law: a/ How can I use it to my adantage and b/ what do I have to do now?

cappy1501 wrote: »

I'm not a lawyer so can't really offer you all the details but I can send you links to lots of advice, just let me now.

That´d be greatly appreciated. Thank you!

cappy1501 wrote: »

The only other thing I can say is that from my experience no matter how nice the 'notice of redundancy' meeting is it is usually an 'HR speech' to ensure that the company is covered so that they're not sued for unfair dismissal. If your employer is genuinely nice and helpful that's fantastic though!

Despite being very disappointed and emotional right now, I genuinly believe that at this moment, they are really trying to help financially wherever they can. I am still very cautious about this but the offer seems genuine.

Thanks for your reply!

SoSad

dickydonkin

To the OP, as you are not entitled to statutory redundancy pay (by virtue of not having been there for two full years), I think this payment would be classed as a compromise agreement. Having had some experience of compromise agreements (I did a lot of research when a friend was presented with one), a couple of things come to mind:

Just thought of something Briona - if a compromise agreement is involved, the company will have to pay the OP's solicitors fees. As you will know from CA's, it is vital that a solicitor is involved on the employees behalf.

My compromise agreement was weighed heavily in favour my former employer, in fact the only thing the document compromised was me!

My solicitor (of my choice and paid for by the company) sorted it out though.

SoSad_4

dpassmore wrote: »

I am also surprised of the 'three months notice' you have been given due to the short period you have worked for the company. If the company are struggling financially as you suggested, why would they pay something any longer than they have to, although this could possibly be due to contractual obligations.

This 3 months notice is indeed a contractual obligation.

dpassmore wrote: »

In addition, the company is willing to pay you the monthly equivalant of your £70,000pa salary as redundancy when the maximum legal amount is only £380.00

Well, contractually they have to pay my monthly salary till the end of March 2010. So their comment earlier this afternoon was that in order to help me in this situation, they would be willing to pay the 3 salaries as a tax free lump sum.

dpassmore wrote: »

I am sure there will be tax implications. It seems a bit suspicious to me and I would suspect that the company would not be willing to put such terms in writing.

Yes, I also wonder how this would all be done. I think they would be willing to confirm in writing that my contract was terminated by the employer on 31 Dec 2009 and that a one-off payment (70k/12 *3) was made as a compensation. Whether this would be sufficient to receive the payment as a tax free RP, I don´t know.

Thanks for replying!

SoSad