Severance Pay with a Student Loan

xcherryheadx

I've been offered severance pay but wanted to check whether student loan repayments will be deducted as I think it would wipe it out if they are. Can anyone advise?

Also, any info about what else goes on during something like this happens would be very much appreciated! E.g. can I claim benefits? Would I be better to stay on sick leave for future employment reasons?

Masomnia

Student loan deductions apply to pay that is subject National Insurance Contributions, and that's 9% of the amount, so it won't wipe out any payment you get. A severance payment might not be subject to NICs but it's hard to give a definitive answer. Is it redundancy pay? An ex gratia payment? Etc

xcherryheadx

Thanks for your reply - my union has said it will be subject to "tax and national insurance contributions as required by law" but I'm not sure what exactly the payoff is for? I'm off sick with stress and they seem to want rid of me.

Masomnia

Is it just your notice pay? If they dismiss you for capability (ie you're on long term sick, can no longer do the job to simplify massively) then they have to pay you notice, and that would be subject to deductions for student loans.