Trying to understand oblications re: Notice, Redundancy & PILON.

pjapk

Basically having been "on the bench" (sitting at home) for the last 6 months my company is finally looking to make me redundant.

As I have 14 years service I'm up to 12 weeks notice.

We haven't yet started "negotiating" the redundancy terms (hopefully starting next week) but the only area I'm not 100% clear on is the potential for "Payment in Lieu of Notice" (PILON).

If we were to stick with the contract, they would have to provide me with 12 weeks notice, & pay me for that period as per normal. However, having sat on my backside for the last 6 months, doing it for another 3 isn't particularly appealing to me but I don't want to lose out financially.

Also, there /may/ be an chance for me to start a new job immediately when I'm freed from my current one, but that offer might be time-sensitive (i.e. not available in 3 months). Current employer knows nothing of this potential job opportunity.

So, if my current employer were to offer me PILON, should I "expect" this to be payment of the full 12 weeks (I'll mention Tax below) or should I expect to "negotiate" the PILON amount as they could claim that I'm benefiting because I "could" get a new job immediately?

Obviously pay of full 12 weeks & immediate release is the ideal scenario for me but it seems too "easy" and I'm worried that this isn't the case so I need to be thinking about compromise, and what an early release is "worth" to me financially.

I'm 100% certain that there is no reference whatsoever to PILON in my contract so I believe that means that the PILON payment should also be tax-free along with the redundancy payment (bearing in mind the £30k tax limit).

So, where do I really stand? I can't help thinking that, from their perspective, there's no benefit to them for releasing me early if they're paying my anyway so why should they?

I'm hoping I'm missing something obvious!

Thanks in advance,

Paul

SarEl

No - PILON should be the full amount of 12 weeks wages (obviously if offered) - but what may or may not be up for negotiation is what a weeks wage is. It is assumed that a weeks wage is gross by many people - this is not true. Some employers pay the gross (which obviously means you get more money in your pocket. But others pay net (this saving themselves money too - they don't pay your tax or NI amounts and get to keep this).

pjapk

Thanks for the prompt response SarEl.

I was worried I was being greedy expecting the full 12 weeks but coudln't find anything to the contrary online!

Interesting re: the Gross/Net as well, I'll make it one of the first questions I ask once we're on the subject of money but to be perfectly honest if I get what I believe I'm entitled to for the redundancy then I probably won't bicker /too/ much about the PILON tax (though it does add up) as it'll likely end up pushing me into taxable redundancy anyway.

Is there no precedent/standard re: gross/net for PILON then? Seems open to abuse!

Paul

SarEl

But you might be able to "persuade" then to go for 12 weeks net PILON if it saves them some money too?????

But no, there are no rules. It isn't open to abuse because nobody gets paid less than they'd have been paid anyway - some people are just lucky and get more. But if you want to speed your exit out of the door a sweetener for them may be attractive?

pjapk

Hmm, still getting my head around it all (never was good at Tax stuff!).

Although PILON doesn't feature in my contract, further reading suggests that, if the company regularly pays PILON then HMRC consider it "standard policy" and so deem it taxable.

In that case, how would things work if I'm paid "net" PILON, would I end up being taxed on my *net* PILON (so effectively double-taxed) or would receiving net PILON imply it's taxed already?

Confused!

(I'm not looking to scam the company or tax man, just looking to maximise what I'm entitled to!)

SarEl

Yes, if it is common practice then it is taxable - but then in that case you don't suggest it! This only works where it isn't.

pjapk

Pardon me for being dense but, to clarify (if they even offer PILON):

o I should first find out whether they *typically* PILON
If yes, I should "ask" that they pay PILON as gross, which I'd then be taxed on
If no then I could "suggest" they would be advantaged by paying net.

However, if they DO normally PILON AND they only pay NET PILON then I'm scuppered & will be double-taxed anyway?

I've always hated tax matters, they never make any sense to me! I'm not even sure I understand my own question, never mind what the answer might be!!!

SarEl

Will you stop asking these questions - I hate maths and tax! There shouldn't be any doubling of tax - you only get net and untaxed if tax isn't due. If they normally tax pilon they will have to tax it so all you will receive is net pay.

Someone who isn't a lawyer help me out here with the explanation!

getmore4less

Start from the basics.

Once they decide to terminate they have to give you 12 weeks statutory notice because you have worked more than 12 years.

There are 3 options

1: You work it, unlikely since you have been on gardem leave for 6months allready.

2: Garden leave, might prefer to have you not work for a competitor.

3: PILON : immediate release, there are 3 possible outcomes.

a: if contractul(or normal practice) this is gross pay and taxed in the current tax year(also NI and company NI)
b: gross pay added to redundancy and taxed over £30k.
c: net pay added to redundancy and taxed over £30k.

if the company prefer 1,2 then if the PILON would not be contractual you might be able to put 3b on the table to save them company NI, then if that does not work 3c on the table saves even more.

If you can't get them to go for 3 then you do have the option of counter notice and giving up the notice pay(once you have a new job).

Also service for redundancy should include the statutory notice.

SarEl

Yes. I knew some bright spark could explain tax better than me!

pjapk

Thanks both!! GetMore has summed it up pretty neatly for me I think.

I shall now accept the advice and try to stop over-thinking things!