Redundancy - staggered or phased payments

Nicky_j_r

I need some advice. I am at risk of redundancy & my employer is offering to pay my redundancy money in phases.
It will either be over 7 months or 25.
Does anyone know the tax or benefit implications?
I am worried because it will be declared as income in this tax year, but I won't receive it all until 2014.

getmore4less

What if they go bust?

Nicky_j_r

getmore4less wrote: »

What if they go bust?

Whilst that is a worry, I think the parent company will honour the payments.

getmore4less

How enhanced is the package, why won't they just pay up.

depending on totals and work plans delaying till next tax year might be worth while.

can you restructure the payments so some are not actualy taxed untill recieved, I know a bank person that had bonuses that paid out in future years taxed in the years they recieved them even though they had been made redundant.

Nicky_j_r

The company won't pay in a lump sum.

I haven't got a final date yet, so I'm not sure if it will be this tax year or next.
But will it matter if the payments are going over 2 years?

I guess the difference between a bonus and a resundancy is the effect on the benefits that someone will get.

getmore4less

Nicky_j_r wrote: »

The company won't pay in a lump sum.

I haven't got a final date yet, so I'm not sure if it will be this tax year or next.
But will it matter if the payments are going over 2 years?

I guess the difference between a bonus and a resundancy is the effect on the benefits that someone will get.

I would get independant legal advice on that.

There will be some that they have to pay out on termination.

I would have a very close look at the terms of the payments.

lambourne

You don't pay tax on any redundancy payments under £30K but def get legal advice as it looks a bit 'odd'.

zzzLazyDaisy

There are some payments that your employer MUST pay on termination. If it refuses to do so, you can complain to an employment tribunal, and if they go bust in the meantime the govt will pay you most of the money owed (if not all).

These payments are:

Statutory redundancy pay (tax free up to £30,000)
Payment in lieu of notice (possibly tax free, see below)
Wages owed at termination (taxable)
Holiday pay owed at termination (taxable)

Statutory Redundancy pay up to £30,000 is tax free. Some other payments such as company redundancy pay and payment in lieu of notice may also be included in that figure (depending on whether they are contractual or not).

So the first thing we need to know is whether the money they are talking about is over and above the payments itemised above?

If the answer is yes, then you need to know where they have got the figures from - if for example there is a company redundancy scheme which is deemed to be contractual, then they must follow the rules of the scheme (a contractual redundancy payment would be taxable).

They may want you to sign a compromise agreement accepting their offer - if so you are required to seek legal advice so make sure you clearly understand what is being asked of you and ask as many questions as you need, because in signing a CA you are signing away your rights to complain to an employment tribunal later.

It is most unusual for redundancy payments to be paid in installments - it does happen sometimes with very senior directors who are very highly paid, but not normally for ordinary workers. You might believe that the parent company would honour the agreement, but if your employer does go bust owing you money, the parent company has no legal obligation to honour the agreement - and to be honest it is rare for this to happen.

Nicky_j_r

That's good advice, thank you.

geminilady

[QUOTE=zzzLazyDaisy;5089592

Statutory Redundancy pay up to £30,000 is tax free. Some other payments such as company redundancy pay and payment in lieu of notice may also be included in that figure (depending on whether they are contractual or not).


Hi what do you mean by contractual?do you mean it must state in the employment contract?I have just been made redundant and at the lady seemed to know very little anyway she checked with HQ and said my lieu of notice will be taxed,do you know if I will get a cheque or will all the money,redundancy lieu of notice,holiday pay be paid straight into my bank?

anamenottaken

geminilady wrote: »

[QUOTE=zzzLazyDaisy;5089592

Statutory Redundancy pay up to £30,000 is tax free. Some other payments such as company redundancy pay and payment in lieu of notice may also be included in that figure (depending on whether they are contractual or not).


Hi what do you mean by contractual?do you mean it must state in the employment contract? (1) I have just been made redundant and at the lady seemed to know very little anyway she checked with HQ and said my lieu of notice will be taxed, (2) do you know if I will get a cheque or will all the money,redundancy lieu of notice,holiday pay be paid straight into my bank? (3)

(1) It doesn't have to be written in your main documentation - it might just be in the policy document about severance. It may also be considered contractual if it is customary for that company to pay in lieu of notice or make enhanced redundancy payments.

(2) they would probably say this in any case because it means they deduct the tax from you and if HMRC did not agree they as employer would not have to pay extra to HMRC.

(3) We can't know that. You'll have to ask your employer.