Redundancy calculations

Mrs_Optimist

My DH, who is 42, is about to have redundancy confirmed tomorrow and I need to try and plan the financial aspect for the next few months.

We have had a slip through from his employers today calculating statutory redundancy pay at nil (incorrect - he has worked for over 4 years and been TUPE'd so my understanding is that previous service, and t&c also transfer with him).

Contractual PILON is £1620.46 which is 4 times his weekly salary of £405.12 gross. That seems correct.

HOWEVER

His terms and Conditions state that once he completed 2 years service by the date of termination or expiry of any PILON he is entitled to receive redundancy plus an additional non-statutory severance payment calculated at 1 weeks pay for each completed year of service (4) His weekly gross pay is £405.12.

This is calculated as follows:
Redundancy 1 weeks pay for each full year or service (4)
Non-Statutory Severance 1.5 weeks of pay for each full year of Service (4)
Any PILON paid is based on the employees total renumeration package including any contractual benefits such as entitlement to a car, private medical insurance (DH does not benefit from either of these but he does receive a tool allowance every month, and has done since he started)

So my understanding is he should receive
PILON
Redundancy pay
Non-Statutory Severance pay
Any accrued but not taken holiday

Is this correct? I presume he pays tax on the PILON but what about the rest? Does his tool allowance come into play at all?

Any help would be appreciated as I think his employers may try to shaft him if we don't get our facts right.

Thank you for reading and thanks in advance for any advice you may give.

jazzyman01

You are correct, previous T&C will transfer unless he has been given a new contract changing the current terms. His service is also inclusive of time prior to TUPE assuming he has uninterupted service.

Redundancy is quite strict it is actual service so if he does not complete 4 years until say October he will only receive 3 years.

Your calculation is confusing.
Statutory redundancy will be 1 week (capped at £400) for each completed year of service to age 41 and 1.5 for each completed year of service over the age of 41.
Enhanced severance in T&C looks like 1 x weeks pay for each completed year of service.
PILON is for notice and does not usually include things such as a tool allowance as when the job ends so does the need for work tools. However, it is worth asking for this.
He would be expected to pay tax on PILON and accrued holiday pay. Only redundancy pay is free of tax.
Of course the Company could make him work his notice so PILON would not apply.

Mrs_Optimist

Thanks for this - wasn't sure whether PILON and Severance were the same thing as this is new to me.

Start date was 12th February 2007 so definately 4 complete years service. He was 42 in January so had not worked a complete year since then so looks like will just be 1 week for each complete year. However he was TUPED from his original firm on 1st July 2010, receiving firm went bust 6 weeks after TUPE and another company bought the contract and the workforce who are now making them redundant. He has letters from all 3 employers confirming length of service, t&c remain the same, BUT the statement he has received from his current employers shows a start date of 1st July 2010 so redundancy does not apply. This is wrong.

So I take it that PILON is £1620.46 (gross but tax payable)
Statutory redunancy is £1600 (£400 x 4) (Tax free)
Non-Statutory severance is £2430 (week and half gross pay x4 weeks) (tax free)
Plus any accrued and untaken holiday pay, obviously subject to tax.

I would be surprised if they were require to work their notice as there is now no work to be done since the company pulled the plug on the contract.

Thanks for your help in this minefield.

getmore4less

If he is 42 there should be 1.5 weeks for 1 years worth of statutory redundancy

Mrs_Optimist

He turned 42 in January so hasn't worked a full year whilst 42 - or does that not make any difference? Sorry for the stupid questions but I really haven't a clue (as you can tell!). Can I just confirm that severance pay is not the same things as Notice Pay or PILON - or is that wrong?

LittleVoice

Mrs_Optimist wrote: »

Can I just confirm that severance pay is not the same things as Notice Pay or PILON - or is that wrong?

my understanding:

Severance pay - pay because the employment is terminated by the employer. Redundancy pay is a severance payment.

Notice Pay - pay during the notice period.

PILON = Pay In Lieu Of Notice - instead of giving notice and paying during that time, the employer pays an amount to recompense the worker for not having received paid notice as required by the employment contract.

jazzyman01

The employers may be confusing the fact that they do not have to TUPE the existing terms and conditions when taking over a company in insolvency. However, they do take over service and this has been acknowledge in writing from his current employers.

With regard to redundancy, he would be entitled to the 4.5 weeks redundancy pay.

Mrs_Optimist

Thank you for taking the time to post - it is much appreciated at a very stressful time.

DH was told yesterday that he will be made redundant, finish date of 19th September. However they did not think he was entitled to any redundancy pay as they had a start date for him of 1st JULY 2011 when the original TUPE took place. However he had written confirmation from all 3 employers that his service, t&c would carry forward to hopefully this will be enough to stop them in their tracks of trying it on.

So he should get 1 month notice (not PILON as he may be required to go into work at short notice) Tax payable. PLUS
3 weeks redundancy at 1 weeks wage and 1 weeks redundancy at 1.5 weeks pay. Tax not payable on the redundancy pay. Is that right?

jazzyman01

If his contract states 1 months notice then he will get that, but it may be 1 week for each completed year of service to max 12 weeks which would mean he would get 4 weeks.

Yes redundancy pay is tax free to a sum of £30k.