Redundancy or not, that is the question!

[Lostprophet]

Hi All,

I have been with my company for almost 1.5 years, the HQ is based in Europe and so have no understanding of UK law and terms. I am in the UK business, which is closing down. I have verbally agreed my exist to be in early Q1 2016. I will be just shy of 2 years.

I agreed payment terms, as in x months of salary, at the end of the contract. The manager wants me to complete a few important tasks which he said will need to be done before they make payment.

I consider the payment as redundancy, i.e. shouldn't be taxed and being made as the role is being terminated. They got some advice and they consider this a retention payment or a final bonus and say it should be taxed.

I have argued my role is coming to an end as they are selling the asset and there will be nothing left for me to do hence they are paying me off.

I have also said for a compromise agreement to be put together, for the payment to be treated as a redundancy and I will commit to the tasks which are needed to be done.

My viewpoint is I dont think I have much rights in terms of the law, I simply dont want to do the tasks needed over the next 6 months if I am getting peanuts, i.e. the final payment being taxed so heavily, and essentially I would like to quit after getting my year-end bonus. They can sort out their own stuff themselves in Q1 without my help. I think they do need me.

What would you do? How can I play it?

[jjones]

I would be looking for pastures new if I were you - unless you have something in writing with a number that has a lot of zeros after it that is acceptable after paying tax on it.

[Lostprophet]

Unfortunately I am committed to the end of the year. I need the year end bonus. Its going to pay off a course fee which is approx £10k. I cant leave until then anyway.

The payoff is 3 months worth, which is just over £16k. Gross thats fine but net thats crap IMHO and not worth all the effort of staying on for 3 months and all the tension and stress of whats due in 2016.

I do want to stay on until Apr 2016, however only if they agree to my terms. Am I incorrect with my approach, i.e. saying its redundancy and it should be in a compromise agreement

Edited by Lostprophet on Wednesday 16th September 23:46

[singlecoil]

This sounds like a negotiation scenario. They want something from you, and you want something from them. Make sure they understand what you want, and if they are having trouble with the redundancy thing, then they need to up the final payoff to allow for the tax and they can call it what want. If they don't want to do that, then you either go along with what they want, or exercise whatever options you have.

[anonymous-user]

I will admit (again) that my UK tax law is not up to date, but if its not in your contract and you don't attend/work for it, then you should be able to treat it as pay in lieu of notice and get it tax free.

[davek_964]

Berw said:

I will admit (again) that my UK tax law is not up to date, but if its not in your contract and you don't attend/work for it, then you should be able to treat it as pay in lieu of notice and get it tax free.

Pay in lieu of notice is never paid tax free. The fact that you are not actually working for it is irrelevant.

It sounds like the company do not want to call it redundancy for the simple reason that they only want to pay it to you if you complete the work that they have said they need completed. If it was "redundancy" then you would be entitled to it pretty much regardless - but if they treat it as a "bonus" payment then they have every right to keep it if you haven't completed the work (and of course that makes it taxable).

Given that you're legally entitled to zilch, it doesn't sound that bad really.

[andy-xr]

Ask them for a 1 month redundancy payment and a 3 month ex gratia payment instead then. Makes no odds to them. A redundancy payment should be taxed, as it's payment in lieu. An ex gratia payment wouldnt be taxed

The way in which you're being let go is possibly a bit stty, it's nice to get a clean break and redundancy can sometimes help people turn a corner and the money can help them go off and do something different.

A compromise agreement, tbh I'd not go all out to get one unless you're really sure you dont have any claim against them (sounds like you dont, and sub 2 years would negate anything that's not obvious). If you do go down this route, for it to be valid, you need an employment lawyer to sign off on it. Usual cost would be a few hundred quid and the company would pay that. No legal walk through, not binding.

EU employment laws are often stricter than UK ones anyway, so I'm not sure if I'd play that card

[pherlopolus]

PILON is taxed, Redundancy isn't until you go over 30k....

I would try and get it classed as redundancy, maybe get them to pay for a legal check to make sure it is done right?

[Jefftav]

Negotiate your final payment as hard as you can - who else are they going to get to it? However I think it will always be taxed so you need to keep any tax payments in the equation.

I think you have to be in continuous employment for 2yrs before being eligible for a redundancy payment. You can google and check the .gov.uk website as it has all the information you need.

[davek_964]

Jefftav said:

I think you have to be in continuous employment for 2yrs before being eligible for a redundancy payment.

You need to be employed for 2 years to be legally entitled to redundancy, but there is no minimum period that prevents your employer being nice and giving you redundancy before the two year period is up. (And even if it was over two years, they could pay an awful lot less than the figures that have been mentioned earlier in this thread).

[edc]

It would need more detail but based on what you write it would be a taxable payment. The driver for the payment is completion of specific tasks. That is taxable in anybody's books.