Am I entitled to tax free PILON? (12 weeks) Also, wrongful dismissal detail.

Tom_R

Hi,

I will cut to the chase. I was unceremoniously dumped from my Director level position on Friday. I have been with the company for 6 months (I'm well aware of 2 year threshold for unfair dismissal verus wrongful)

I received no notice, just taken in to a side room by the CEO and HR and handed a letter saying they were terminated my contract of employment and will pay me 12 weeks, as per my contract.

All good so far.

However, my understanding here is that I should receive this payment tax free, becaus they have terminated my contract immediately and without notice.
FYI my salary for this period FYI is around £18k and I'm led to believe up to £30k can be paid as gross.
Am I correct in this?

I'm fairly sure I may also have a case for wrongful dismissal here as well - I was given no prior notice of any meeting etc.

I really don't wish to go down that road if I can help it. I've left on reasonably good terms and have no wish to sour that.
However, if I am correct and I do have a case for a tax free PILON (payment in lieu of notice) and they refuse to offer me it, I wonder whether I have this potential wrongful dismissal case as some form of leverage?

Would greatly appreciate any advice please. The official guidelines aren't as clear as I would hope.

I would also like your advice on how best to put this to my ex-employer. Should I have a solicitor draft a letter, or should I first just put my concerns in to an email to HR?

Many thanks

T

NelliePie

Did you have a probationary period in your contract as I'm pretty sure they can dismiss you without much reason/notice within that period - check your contract in the termination of employment section. I've never heard of tax free final payments so can't offer much advice there other than to question why it would be tax free - it's income so is surely subject to income tax?

getmore4less

Wasting your time

Even if they can pay it tax/NI free they only have to give you the net pay as compensation as that would be what you got if you had worked.

PILON only has to cover the loss.

They don't even have to pay the holidays that could have accrued during that period.

Undervalued

Tom_R wrote: »

Hi,

I will cut to the chase. I was unceremoniously dumped from my Director level position on Friday. I have been with the company for 6 months (I'm well aware of 2 year threshold for unfair dismissal verus wrongful)

I received no notice, just taken in to a side room by the CEO and HR and handed a letter saying they were terminated my contract of employment and will pay me 12 weeks, as per my contract.

All good so far.

However, my understanding here is that I should receive this payment tax free, becaus they have terminated my contract immediately and without notice.
FYI my salary for this period FYI is around £18k and I'm led to believe up to £30k can be paid as gross.
Am I correct in this?

I'm fairly sure I may also have a case for wrongful dismissal here as well - I was given no prior notice of any meeting etc.

I really don't wish to go down that road if I can help it. I've left on reasonably good terms and have no wish to sour that.
However, if I am correct and I do have a case for a tax free PILON (payment in lieu of notice) and they refuse to offer me it, I wonder whether I have this potential wrongful dismissal case as some form of leverage?

Would greatly appreciate any advice please. The official guidelines aren't as clear as I would hope.

I would also like your advice on how best to put this to my ex-employer. Should I have a solicitor draft a letter, or should I first just put my concerns in to an email to HR?

Many thanks

T

Sorry but no, I don't think so.

It was a contractual entitlement to three months notice and the firm could have made you work your notice if they so chose. Had they done so you would just have got your salary (taxed) in the normal way.

So I see no reason why this should be tax free.

The 30K you mention is the tax free amount of compensation or redundancy you can receive. However you are not being compensated, just paid you contractual entitlement.

Had you been there long enough and were made redundant your redundancy payment (up to 30K) would be tax free but the payment in lieu of notice would not.

motorguy

Tom_R wrote: »

Hi,

I will cut to the chase. I was unceremoniously dumped from my Director level position on Friday. I have been with the company for 6 months (I'm well aware of 2 year threshold for unfair dismissal verus wrongful)

I received no notice, just taken in to a side room by the CEO and HR and handed a letter saying they were terminated my contract of employment and will pay me 12 weeks, as per my contract.

All good so far.

However, my understanding here is that I should receive this payment tax free, becaus they have terminated my contract immediately and without notice.
FYI my salary for this period FYI is around £18k and I'm led to believe up to £30k can be paid as gross.
Am I correct in this?

I'm fairly sure I may also have a case for wrongful dismissal here as well - I was given no prior notice of any meeting etc.

I really don't wish to go down that road if I can help it. I've left on reasonably good terms and have no wish to sour that.
However, if I am correct and I do have a case for a tax free PILON (payment in lieu of notice) and they refuse to offer me it, I wonder whether I have this potential wrongful dismissal case as some form of leverage?

Would greatly appreciate any advice please. The official guidelines aren't as clear as I would hope.

I would also like your advice on how best to put this to my ex-employer. Should I have a solicitor draft a letter, or should I first just put my concerns in to an email to HR?

Many thanks

T

You seem to be confusing a tax free payment that you might receive as part of a redundancy package, with PILON. Two different things entirely.

You're not entitled to a tax free payment.

Also, as has been said, you've no rights to claim wrongful dismissal - unless you have a protected attribute such as a disability, etc, that formed part of the reason they sacked you.

Realistically - you're stuffed. Take the PILON and go. If they dont want you there as a director for whatever reason then sadly you need to take that on the chin and move on.

Undervalued

Tom_R wrote: »

I'm fairly sure I may also have a case for wrongful dismissal here as well - I was given no prior notice of any meeting etc.

Doubtful I'm afraid.

Unless there is a hard and fast contractual entitlement to a formal disciplinary process (which would be fairly unusual) then they were under no obligation to follow one with less than two years service.

If there was then, in theory at least, you could make a wrongful dismissal claim but the most it would yield would be a few days pay to compensate for however long it would have taken to follow the procedure.

Tom_R

NelliePie wrote: »

Did you have a probationary period in your contract as I'm pretty sure they can dismiss you without much reason/notice within that period - check your contract in the termination of employment section. I've never heard of tax free final payments so can't offer much advice there other than to question why it would be tax free - it's income so is surely subject to income tax?

Thanks for reply.

The probationary period was 90 days, which I sailed through, making this decision on Friday doubly surprising.

IN terms of hols accrued, I actually owe them 1.5 days according to their letter.

I felt I had a case for tax free payment because they terminated my contract without notice....

Undervalued

Tom_R wrote: »

Thanks for reply.

The probationary period was 90 days, which I sailed through, making this decision on Friday doubly surprising.

IN terms of hols accrued, I actually owe them 1.5 days according to their letter.

I felt I had a case for tax free payment because they terminated my contract without notice....

A probationary period has almost no meaning in law. It may give you some extra contractual rights if the firm deem you to have passed depending on the terms on which you were engaged.

The haven't terminated without notice, they have give you three months notice but opted not to make you work it.

Technically that may be breach of contract, but only in the unlikely event of your contract not reserving that right. Any normal sensibly worded contract will reserve the right to give PILON.

Sorry but I really don't think you have any case worth pursuing.

Tom_R

motorguy wrote: »

You seem to be confusing a tax free payment that you might receive as part of a redundancy package, with PILON. Two different things entirely.

You're not entitled to a tax free payment.

Also, as has been said, you've no rights to claim wrongful dismissal - unless you have a protected attribute such as a disability, etc, that formed part of the reason they sacked you.

Realistically - you're stuffed. Take the PILON and go. If they dont want you there as a director for whatever reason then sadly you need to take that on the chin and move on.

Yeah, I'm very much settled on this anyway tbh. I just want to make doubly sure.

The information out there is somewhat contradictory.

This is from a recent article in Personnel Today. From this I don't think it's unreasonable of me to deduce that I am entitled to a tax free payment, no?

"Scenario three is when it is most likely that a PILON can be paid tax free. This is because the employer is likely to be in breach of contract in terminating the employee’s employment without proper notice. As a result, the payment made to the employee is not a payment under the terms of the contract of employment, which would be taxable; instead it is an advance payment of damages, aimed at compensating the employee for the employer’s breach of contract and avoiding a potential legal claim. As long as the payment does not fall under the foreign service exemption, the payment will be tax free up to £30,000."

source: http://www.personneltoday.com/hr/legal-qa-when-can-payments-in-lieu-of-notice-be-paid-tax-free/

Undervalued

Tom_R wrote: »

Yeah, I'm very much settled on this anyway tbh. I just want to make doubly sure.

The information out there is somewhat contradictory.

This is from a recent article in Personnel Today. From this I don't think it's unreasonable of me to deduce that I am entitled to a tax free payment, no?

"Scenario three is when it is most likely that a PILON can be paid tax free. This is because the employer is likely to be in breach of contract in terminating the employee’s employment without proper notice. As a result, the payment made to the employee is not a payment under the terms of the contract of employment, which would be taxable; instead it is an advance payment of damages, aimed at compensating the employee for the employer’s breach of contract and avoiding a potential legal claim. As long as the payment does not fall under the foreign service exemption, the payment will be tax free up to £30,000."

source: http://www.personneltoday.com/hr/legal-qa-when-can-payments-in-lieu-of-notice-be-paid-tax-free/

See my reply (no 8) above, cross posted with yours.

Just to add, the firm can (and will) deduct tax. IF you shouldn't have paid it you have up to six years to reclaim it from HMRC.

Tom_R

Undervalued wrote: »

See my reply (no 8) above, cross posted with yours.

Ah, just seen that yes. Thanks again.

I guess I will review the contract itself (my only copy is in my work inbox so will have to request a copy!)

Thanks