Questions about redundancy

Squiffy

I've was formally notified of redundancy today. I've know this was highly likely for quite a while, and my current job role disappears at the end of this month.

I have a 3 month notice period in my contract, which they will have to honour.

Can I ask that they release me from my employment at the end of the month, but still pay the full 3 months notice?

I've also heard that in these circumstances, the Inland Revenue might agree to allow the notice period salary to be considered as part of my redundancy, and therefore be tax free. How do I go about getting the Inland Revenue to agree to this, on the off-chance that it does happen?

Any info or advice would be much appreciated.

YorkshireBoy

I was made redundant just over 2 years ago, so I'm answering based on my situation as it was then. Rules may have changed since then so do your own research!

Squiffy wrote:

I have a 3 month notice period in my contract, which they will have to honour.

Can I ask that they release me from my employment at the end of the month, but still pay the full 3 months notice?

I believe this is entirely up to the employer, although your union/works rep (which I believe they have to appoint by law - depending on numbers involved?) may be able to apply some "pressure". In my experience, they want you out of the way - especially as you will not be motivated and may even be a distraction to others - I know I was!

Squiffy wrote:

I've also heard that in these circumstances, the Inland Revenue might agree to allow the notice period salary to be considered as part of my redundancy, and therefore be tax free. How do I go about getting the Inland Revenue to agree to this, on the off-chance that it does happen?

Again, I believe that up to £30K of "package" is tax-free (mine was £21K and I wasn't taxed).

One final point though - I couldn't get JSA because of the 3 months in lieu. Nor could I get any other help due to the "savings" I now had. Just in case you get any ideas like I had, when I went to CAB regarding paying off a big chunk of my mortgage they advised me against doing it as I was intentionally depriving myself of savings.

There are some real experts in employment law on these boards who'll be along shortly, but I hope this helps in the meantime.

Oh, and good luck in whatever you do from now on.

HTH
YB

Squiffy

Thanks for the info. I had the foresight to join the Union back in April, so I'll be contacting them today for info and advice.

stripeyfox

Try the Department of Trade and Industry website, I think the address is dti.gov.uk, lots of information on there.

Squiffy

OK, I've spoken to the Inland Revenue about how my notice period money would be treated if my employer agrees that I don't have to work it.

Basically, any notice period that is in your contract would be taxed normally.

It is only whatever your employer offers over and above what is in your contract that would be able to be taken tax free.

e.g. if you have 3 months notice period, but they offer you 4 months notice to leave tomorrow, then 1 month would be treated as within your 30k tax free redundancy payment.

YorkshireBoy

Squiffy wrote:

OK, I've spoken to the Inland Revenue about how my notice period money would be treated if my employer agrees that I don't have to work it.

Basically, any notice period that is in your contract would be taxed normally.

It is only whatever your employer offers over and above what is in your contract that would be able to be taken tax free.

e.g. if you have 3 months notice period, but they offer you 4 months notice to leave tomorrow, then 1 month would be treated as within your 30k tax free redundancy payment.

This seems to contradict my situation of 2 years ago (see earlier post). I've just double checked my paperwork and I definately did not pay tax on any element of my package (22 weeks @ £260 [STAT] + 22 weeks @ £362 [NON-STAT] + 3 months salary in lieu of notice).

Are you on 'Gardening Leave' or 'payment in lieu of notice' (PILON)? Check out the HMRC document...

'SE12975 - Termination payments and benefits: payments in lieu of notice (PILONs) and gardening leave:' at http://www.hmrc.gov.uk/manuals/senew/SE12975.htm

Looking at HMRC website, it seems that there have not been any changes to policy in the last 2 years. It therefore seems your situation may depend on whether you are being put on 'gardening leave' or 'payment in lieu of notice' (PILON).

The key elements here (if you read the above document - and it's other linked documents) are the dates on any documents you receive. If they say your termination date is September/October 2005, you *MAY* be put on 'gardening leave' and any payment will be taxed. If they say your termination is sometime in July (ie a weeks notice and then 4 weeks consultation), then you're a PILON! and your payment will be tax-free.

I'm concious that I seem to be 'fighting against' you here, but it's just that I don't want you to lose out thats all.

Squiffy

Yorkshireboy - please don't worry about contradicting me. I put the question up to get advice. If the IR bod is wrong, then I'll be very happy indeed. Potentially we are talking about the difference between an £11k redundancy tax free plus 3 months taxed salary of £15750, or £26750 completely tax free.

I know which one of us I'd like to be right.

It may be that I didn't phrase the question very well to the IR bod to make it clear that I would not be working. Mind you, thats because until Friday I don't actually know what will be happening in regard to this, so my question to the IR was quite open ended.

I've had zero help from the Union so far, but I'm pushing very hard to have them in attendance on Friday.

My main outstanding question is going to be on what happens with my holidays. Basically I still have my full annual allowance left, and I'm not sure whether this will be paid along with redundancy & notice pay.

FLEX24

Have you got all the facts yet Squiffy?

If your Company is any good at all it should have got together some sort of information pack setting out the Terms of your redundancy ie notice, holiday, monies etc. If not then ask for them.

My guess is your holiday will be paid pro-rata depending on when their year starts and how much you get a year. The same as if you resigned yourself.
Eg if you are half way thru their year and not taken any holiday, you will get half .

Cant be sure about this but I think I read somewhere you may have some bargaining power depending on how many people are going. The fewer there are, the more you can push( depends how big the company is though).

Isnt there a redundancy discussion area on MSE somewhere??

cash99

Payment for notice is taxable if there is either a clause in you contract saying that payment can be made or it is usual or customary practice to make payments in lieu of notice (PILON).

It is only tax free where it represents a payment of damages i.e. the employer terminates your contract without notice, and pays damages equal to the lost wages. This would happen by default if there was no PILON clause in your contract, and your employer asked you to leave immediately and paid you notice pay.

Most recent employment contracts are likely to have a payment in lieu of notice clause in them. But check yours. If there is no clause then ask your employer to pay your notice pay gross.

Holidays should be paid in full, subject to tax.

Savvy_Sue

cash99 wrote:

Holidays should be paid in full, subject to tax.

but as Flex says, only pro rata - you don't get a full year's entitlement unless you work the full year. I'm sure that's what cash meant but wanted to make it clear!

Squiffy

Yorkshireboy - it seems you are right. :beer: I've spoken to my union (at last!) and they have confirmed that as long as I'm not taking gardening leave, the notice pay can be taken within my redundancy.

The company have to agree to this, but bearing in mind that if it is taxed they will have to pay employers NIC on it, they should be quite amenable.

Great news!

And thanks for the useful links you gave. I'll use them tomorrow if I do need to negotiate on this point.