Pay instead of Notice - Does it include other items?

[robm3]

We're considering releasing someone from our business, they have a 3 month notice period. We also pay their medical and provide a car allowance.

Would we need to pay just the base salary for three months OR
Base salary AND medical & car for 3 months?

Lastly, they receive a yearly bonus (due in 6 months), should we provide pro-rata for this as well?

Just want to get some different opinions to what we've been informed by HR.

Thanks in advance,
Rob.

[randlemarcus]

As ever, what does their contract state?

I'd imagine that if you were not firing them, or making them formally redundant, it would come down to negotiation between the firm and the person who is off.

[anonymous-user]

Legal view: you must provide the cash equivalent of all contractual benefits, including bonus (pro rated), if that is contractual.

[davepoth]

All the below assumes you've got a fair reason for dismissal.

I understand that legally, it will depend on the effective date of dismissal.

If it's "gardening leave" then they'll still be employed for those three months, although not actually doing any work, so all benefits would continue for the notice period. That's almost certainly the best way to go, doesn't affect the contractual terms, and closes down an avenue for a court action.

Now, the worker in question may want to be released immediately so they can start hunting for work, and in that case you have a small bargaining point that you could use if you want to reduce your expenditure since the employee wants to do something outside of their contract.

[Du1point8]

Might I be the first to ask if the contract states that to get your yearly bonus you must be employed by the company on X date?

All places I have worked at state that to get your bonus, you must be employed on 31st of december, if let go before then you get nothing at end of the financial year when they are dishing them out.

[Slurms]

As has been already commented it's 3 months worth of all their contractual entitlements.

Though you might want to check that you have the right to pay someone in leu of notice - it's not in every employment contract.

The bonus will be determined dependant on how it is worded in the contract. Most bonuses (excluding commission based work) tend to be discretionary and so aren't normally covered by this kind of thing.

BTW when you say "releasing" someone are you making them redundant or firing them?

[anonymous-user]

Even a discretionary bonus can be contractual, in the sense that the employer must not exercise the discretion capriciously.

[robm3]

It's voluntary redundancy, so we can negotiate.

We've been told that bonus does not legally have to be paid but benefits do. It's not big $'s but wanted to check others viewpoint.

[Slurms]

But if it's discretionary at a given point in the year and assuming that date is after the termination of employment is an employer required to include any part of the bonus in any payment in leu of notice?

[anonymous-user]

The entitlement depends on what the contract says, and I would take legal advice rather than rely on what HR bods say.

If the parting of the ways is consensual, all bets are on, or off, as the case may be. Be sure to obtain the employee's signature to a lawyerised Compromise Agreement when you have agreed terms. Statutory claims cannot be waived without such an agreement, although contractual ones can be.

In some circumstances, a stipulation requiring an employee to be employed at a given date to obtain a bonus could be construed as a restraint of trade, but only in a case where the bonus was mahoosive, as that would operate as an indirect bar on the employee leaving.