Redundancy - confusing situation

whambam4

Hi, I am in a confusing situation and wondered if anyone can advise as to where I stand.

Previous to my redundancy I had worked as a permanent employee with the company for 7 years. In the more recent 4 years this was on a fixed term contract.

My fixed term contract came to an end in March when I was effectively made redundant. I agreed to a 6 month interim position (different to previous role) which finished a couple of weeks ago. At which point I received a redundancy payment (for the role that ended in March).

On the day I left, having covered a gap while recruitment occurred I was asked to return for a further 3 months as the new recruit had decided to leave. I was asked to return 2 weeks after my leaving date so that there was a gap.

Having negotiated the terms of the contract (as they were different to before), and agreed to return it now transpires that I will be required to pay tax on the redundancy payment I received. This will be deducted from my first month's pay of a 3 month contract and will pretty much cancel out one month's pay.

Can anyone confirm that this seems like a logical course of events?

As I'd like to return, but not be out of pocket, is there another HR way for me to return without paying tax on the redundancy money? E.g even though I have been made redundant can I return the redundancy money - and request that it be paid to me at the end of the new interim contract.

The reason I ask is that the pay I am returning on is already less than I was on before - mainly due to a previous salary which was honored for the term of the interim role. And I can't see that it makes financial sense to return, although I'd like to.

Sorry - my explanation may not be good enough to provide guidance, but if further information is needed just ask.

Thanks in advance

getmore4less

Was this stautory or enhanced redundancy?

Why are they recruiting when this is potentialy a suitable alternative?

Any reason why it is not?

If this was a genuine redundacy then there should be no tax on the redundancy payment even if you do coe back.

The change in circumstances means this is a new job starting from scratch.

If they want to say otherwise insist on continuity of employment.

Might have been better to do this extra work as a contractor rather than an PAYE employee.

TELLIT01

You wouldn't receive redundancy payment at the end of a fixed term contract. The contract has simply run its course and your employment ceases. You may have been paid a loyalty bonus but that isn't the same thing. Redundancy pay less than £30k (I think that's the figure) is not taxable, a loyalty bonus payment would just be classed as normal income and would be taxable.

TrickyDicky101

TELLIT01 wrote: »

You wouldn't receive redundancy payment at the end of a fixed term contract.

I'm pretty sure that isn't true - redundancy entitlement (statutory) would be due even to someone on a fixed term contract (assuming they meet the minimum employment duration).

sangie595

TrickyDicky101 wrote: »

I'm pretty sure that isn't true - redundancy entitlement (statutory) would be due even to someone on a fixed term contract (assuming they meet the minimum employment duration).

That would be the case, but not in this situation. If there is a two week gap between employments then continuous service is lost. And if there is no gap then the entitlement to redundancy pay is calculated on the new lower salary.

On the other hand, I have not a clue what the employer is talking about - if redundancy is due now, and the employment terminated, then any amount under £30k is tax free. And if you enter another employment with the same employer in two weeks time, then that doesn't change a thing about the tax status of the redundancy payment.. Either you have misunderstood the employer, they don't know what they are doing, or they are trying to pull a fast one.

whambam4

I had been in permanent employment with the same company for 4 years prior to the initial 4 year fixed term contract I recently completed.

Thank you for your responses.

This 4 year FTC I completed in March, and since then I have been doing a different interim FTC role for 6 months. So as I understand it the redundancy is being paid on the FTC in general due to my continuous employment of 8 years.

There are geographic complications in terms of working licenses which mean I cannot do the more recent interim role on a permanent basis.

The payment twice the statutory.

I've asked them to consider reinstating my employment and deferring the redundancy payment and am waiting to hear. I am also considering the alternative of returning as an independent contractor, but am not 100% sure how this works.

As sangie595 points out as there has now been an elapsed time since I left, and therefore before I return then I think I will lose my continuous employment - and maybe the later will not work?

This is all too confusing! Is there somewhere I can go for advice? I don't want to be stung by the tax man!

LuckyPenny

Hi, ACAS has a free helpline and website http://www.acas.org.uk/index.aspx?articleid=1461
0300 123 1100


A gap of 2 weeks may not necessarily break continuity of employment if it was foreseen that they would employ you again in 2 weeks time. You still qualify for redundancy pay even if you are on a fixed term contract but you need the required service to be eligible for redundancy payment. In statutory law this is 2 years continuous employment but your employer might have a more generous policy.


Tax is quite complicated. The redundancy payment up to £30k should not be taxed. However they may have to tax any accrued holiday, unpaid overtime and such. If they are paying you in lieu of any notice period they may have to tax you if they reserve the right to do so in your contract.