Untaxed ex-gratia payment to retire early

Undervalued

Depends on the politics and relationship.

Assuming she only pays standard rate tax worst case is she ends up with £2K rather that £2.5K. You say she wouldn't be going down the ET route anyway and would also be saving any commuting costs so maybe take the risk??

Roy1234

https://forums.moneysavingexpert.com/discussion/comment/81930627#Comment_81930627

Yes she only pays basic rate tax, it's not much more than a minimum wage job (despite the stress), so in terms of net income she's more than happy to take the money & go in a month's time; as I said she's almost resigned ahead of this. It's really just a question of whether she can take them at their word, or whether she should request some form of written agreement for the payment before she resigns as they've asked her to.

penners324

Sounds ideal way of leaving.

Surprised she hasn't bitten their hand off.

The cot3 agreement would make it legally binding that she gets paid

Roy1234

https://forums.moneysavingexpert.com/discussion/comment/81930938#Comment_81930938

Yes she did agree there and then. They've requested a resignation letter for the new date. But what do you mean by 'cot3 agreement'? Should she get something written about the ex-gratia payment before she does resign?

Spikeygran

If shes retiring a bit early its a sensible thing to check her NI records to check she has enough contributions for a full pension, or she may end up having to make it up from her £2, 500.

If you claim any benefits like UC will resigning have an impact - I think they can regard it as deliberately putting yourself out of of work. Obviously if shes almost at state retirement age that shouldn't be an issue, but any reductions would eat into the payout.

If there wern't office "politics" going on would she have retired at the same point, would she have otherwise carried on working for longer?

I suppose I'm wondering if the employers have got away with a cheap deal, especially if they thought she had a case to bring, but if its really unpleasant working there, as long as the offer is watertight its probably better to take it. I'm sure she could find something else with a nicer atmosphere quite easily.

Roy1234

https://forums.moneysavingexpert.com/discussion/comment/81931324#Comment_81931324

She's easily met the 35 years full time contributions for a full state pension. She also has a private pension and savings, so claiming any benefits is not on the cards.

She would have worked until June then retired and so have paid a little more into her pension pot but for the behaviour of her boss, not solely directed at her I should add, it's a hateful place to work. The problem with small companies is that if the owner is a nasty man, and the boss between you and them is a bully, there simply is no HR dept, Union, or effective other management to go to. I've seen this in other small companies myself, and between the two of us, we could right a decent sized book about workplace bullying and the failure of employers, including large ones, to deal with it.

As the £2.5k appears to be genuinely tax-free, all she's really losing is the couple of extra payments into her pension that would have happened if staying longer. But as she been close to resigning for weeks, this feels like a good opportunity to get away early.

All I really want to know now if if they should be putting the ex-gratia payment in writing before she resigns?

Jude57

https://forums.moneysavingexpert.com/discussion/comment/81931959#Comment_81931959

I'd say that until the company put their offer in writing, it would be easy for them to deny all knowledge of it. My advice would be that your wife emails her managed, cc'ing the other person present at the meeting, to set out her understanding of what was offered and agreed during the meeting and to say that, upon receipt of written confirmation of the ex-gratia offer, she will tender her resignation. I'd be tempted to counter-offer to leave immediately on 'gardening leave' if the company will pay her one month's salary including the usual deductions and pension contribution, in addition to the ex-gratia payment. That benefits the company because they would have to pay her during her notice period anyway but this way she's immediately gone from the workplace. Your wife benefits by being out of the toxic environment sooner and being paid, including a further pension contribution, for doing nothing for a month.

As far as the private pension is concerned, could your wife make the remaining contributions due to top it up by paying them out of the ex-gratia payment? Those contributions would be worth making. And you probably know, you (she) can get a State Pension forecast easily online here:

https://www.gov.uk/check-state-pension

Spikeygran

https://www.davidsonmorris.com/cot3/

I hadn't heard of cot3 until the other poster quoted it, its described here. It seems this agreement also protects the employer against further action, as well as the payout for the employee.

I think you need to get some official advice on this one (from a brief read of the above) I cant see it being watertight without.

With nothing in writing, she could hand in her resignation, and then they could ghost her. There would be no proof if its all done verbally.. There still seems something a bit odd about offering to pay her off with only a few months to go, unless they have no intention of paying?? Unless its a situation where the employee could do a lot of damage (like a computer programmer or front of house being rude to customers) I think most employers would wait out the 2 months or put them on paid leave.

Undervalued

There is no clear answer to your last line I'm afraid.

Even if this were a formal compromise agreement it would normally say something to the effect that it will be paid without deduction of tax, because both parties believe that to be correct (as compensation that is not a contractual entitlement and under £30K), but that the employer is not liable for any extra should HMRC decide it should have been taxed.

Obviously she would like it in writing but given that this is more informal what is she going to do if that is not forthcoming? Because there is no formal CA or COT3 she could still claim constructive dismissal so she has some protection whilst the employer has none.

A half way house might be to verbally confirm the agreement with her phone "accidentally" left on memo record in her pocket!

Roy1234

https://forums.moneysavingexpert.com/discussion/comment/81932026#Comment_81932026

Thank you, that is good advice. She may have accepted their first offer too quickly last week however, but I will suggest that idea. I like the idea of gardening leave, but remember this is not a generous company, a workmate she confided in was amazed they'd made it. The reason for the one month's notice is that she'll leave just before her replacement arrives. So sweeping her out just in advance means her (lucky) replacement will not get a head start on overhearing the kind of company she has just joined. She will soon enough anyway, though.

https://forums.moneysavingexpert.com/discussion/comment/81932027#Comment_81932027

I share you mistrust of the employers actions with nothing in agreement written. My wife thinks even they wouldn't renege on the agreement, but I am more cautious, hence this thread.

I hadn't heard about cot3 either. I was concerned that T&C's to sign could be slapped in front of her at a later date 'Or else you don't get your ex-gratia' as it were. She doesn't mind signing away tribunal rights, she didn't intend to take them to one. We've seen a lot of bad things as mentioned, and realise the high bar of proof etc to go to an ET; she just wants to get away safely with her money. I don't like the idea of anything being pulled on her at a late stage however.