Negotiating Compromise Agreements - Advice Please?
Discussion
Quick scene setting and then onto the crux of the matter for which I need the PH input.
Wife is currently employed full time in an office based role, which she has been in for about 4 years. She has a reasonable package for the area and role (sub 30K, but including a car and pension - no medical and phone is not for personal use).
She is also pregnant, but not yet into the qualifying period where the company are liable for her maternity pay.
The company recently announced that her job (along with 5 others) was at risk and they have entered into a consultancy period, which was to last for 30 days.
She has had her first one-to-one consultation, in which she asked what package they would offer her if she chose to leave (she was aware others had been offered compromise agreements). They had an amount already calculated in the meeting (~£10k), which appears to cover their cost liability if she were to remain employed until the end of her maternity leave (including bonuses she is on target to hit, plus the statutory redundancy payment - weeks pay per year employed IIRC).
We've responded that in order to seriously consider this offer, they need to increase it to take into account the loss of the car (which would have been available for both of us to use until Jan 2013) and also the fact that the missus is going to be out of the job market for a period of time which is going to have an impact on her employability going forward (the job is fairly specialist, but with quite a few people in the market for similar positions).
We've considered the value of the car to be at least the benefit-in-kind value for tax purposes - but does anyone have a better suggestion of how to value these factors, particularly in light of the wife's circumstance?
I hope this doesn't come across as greedy, as obviously the company could just pay the bare minimum and we'd be far worse off. However I will point out that the company is a large well known "high street" brand owned by a very large parent company, so it's not taking the shirt off the owners back.
They are also on the back foot slightly, due to poor handling of some recent HR issues, and upper management behaviour which could be construed as constructive dismissal. So in reality, her leaving would resolve a number of issues for them, all at once.
ETA - Are there any other factors which need to be considered with compromise agreements, gotchas and suchlike?
Wife is currently employed full time in an office based role, which she has been in for about 4 years. She has a reasonable package for the area and role (sub 30K, but including a car and pension - no medical and phone is not for personal use).
She is also pregnant, but not yet into the qualifying period where the company are liable for her maternity pay.
The company recently announced that her job (along with 5 others) was at risk and they have entered into a consultancy period, which was to last for 30 days.
She has had her first one-to-one consultation, in which she asked what package they would offer her if she chose to leave (she was aware others had been offered compromise agreements). They had an amount already calculated in the meeting (~£10k), which appears to cover their cost liability if she were to remain employed until the end of her maternity leave (including bonuses she is on target to hit, plus the statutory redundancy payment - weeks pay per year employed IIRC).
We've responded that in order to seriously consider this offer, they need to increase it to take into account the loss of the car (which would have been available for both of us to use until Jan 2013) and also the fact that the missus is going to be out of the job market for a period of time which is going to have an impact on her employability going forward (the job is fairly specialist, but with quite a few people in the market for similar positions).
We've considered the value of the car to be at least the benefit-in-kind value for tax purposes - but does anyone have a better suggestion of how to value these factors, particularly in light of the wife's circumstance?
I hope this doesn't come across as greedy, as obviously the company could just pay the bare minimum and we'd be far worse off. However I will point out that the company is a large well known "high street" brand owned by a very large parent company, so it's not taking the shirt off the owners back.
They are also on the back foot slightly, due to poor handling of some recent HR issues, and upper management behaviour which could be construed as constructive dismissal. So in reality, her leaving would resolve a number of issues for them, all at once.
ETA - Are there any other factors which need to be considered with compromise agreements, gotchas and suchlike?
worsy said:
So to be clear the offer is full pay to end of Maternity period, is that 12 months following due date?
Not full pay sadly, wish it was.It's full pay up to the beginning of the maternity leave, then a couple of weeks at 90% - then onto statutory maternity pay (up to 9 months).
However, she is entitled to take 12 months (the last 3 of which are unpaid/un-subsidised) from the date the maternity leave begins (which is declared in advance) - rather than from the due date.
So basically the offer, as we've calculated it, is the cost to the business of keeping her employed (including bonuses she is on target to achieve) until the end of her maternity leave. However, we have excluded the statutory portion of the pay, as I believe this is claimed back by the business from the Gov't.
Edited by Rinko on Monday 24th October 16:32
I think the company are scared that even though she doesn't yet qualify for company maternity pay, she might play the 'preggy card' and claim unfair selection for redundancy on the basis of sex discrimination.
Hence treating her as though she were in receipt of the company's full maternity benefit when calculating the redundancy settlement.
OP she needs to see an employment lawyer. She'll need to do this anyway if she signs a Compromise Agreement.
Hence treating her as though she were in receipt of the company's full maternity benefit when calculating the redundancy settlement.
OP she needs to see an employment lawyer. She'll need to do this anyway if she signs a Compromise Agreement.
Thanks for the replies chaps.
Swerni - perhaps it is irrelevant? I'm purely looking at it from our viewpoint, in as much as she wasn't planning to leave and would therefore have got x,y and z.
She does "qualify" for maternity pay (she has been with the company long enough, worked/earned enough in the qualifying period to satisfy gov't criteria etc), it's just that until ~22 weeks pregnant the company doesn't become liable to pay it.
Ultimately, I don't think they would have selected her for redundancy, partly because of the reason Mobile Chicane cited (they've apparently cocked up some of the consultancy process too)and because of the other recent HR issues I alluded to previously.
The point is somewhat moot now though, as they have increased the offer slightly and the Wife doesn't want to push further (in case they withdraw the offer). We are now waiting on the paperwork, which we will be taking to a solicitor to discuss (at the company's expense).
Therefore, any pointers about what to watch out for in the small print would be gratefully received.
Swerni - perhaps it is irrelevant? I'm purely looking at it from our viewpoint, in as much as she wasn't planning to leave and would therefore have got x,y and z.
She does "qualify" for maternity pay (she has been with the company long enough, worked/earned enough in the qualifying period to satisfy gov't criteria etc), it's just that until ~22 weeks pregnant the company doesn't become liable to pay it.
Ultimately, I don't think they would have selected her for redundancy, partly because of the reason Mobile Chicane cited (they've apparently cocked up some of the consultancy process too)and because of the other recent HR issues I alluded to previously.
The point is somewhat moot now though, as they have increased the offer slightly and the Wife doesn't want to push further (in case they withdraw the offer). We are now waiting on the paperwork, which we will be taking to a solicitor to discuss (at the company's expense).
Therefore, any pointers about what to watch out for in the small print would be gratefully received.
Edited by Rinko on Wednesday 26th October 17:33
Don't forget to look at the tax implications of how the payment is made, there is a certain amount that can be paid tax free.
Don't forget to agree a reference to be used.
My view is that it's like any negotiation, she wants as much as possible, the company wants to pay as little as possible. Just keep pushing to find their bottom line.
Don't forget to agree a reference to be used.
My view is that it's like any negotiation, she wants as much as possible, the company wants to pay as little as possible. Just keep pushing to find their bottom line.
It is normal practice in our organisation to advise the employee to seek indeoendant legal advice. We as a matter of course pay for the employee's cost in getting this advice. Has she been offered this? If not suggest it to the company.
As per other posts she needs to look at how the payment will be made as there are tax implicatiopns.
As per other posts she needs to look at how the payment will be made as there are tax implicatiopns.
Mobile Chicane said:
I think the company are scared that even though she doesn't yet qualify for company maternity pay, she might play the 'preggy card' and claim unfair selection for redundancy on the basis of sex discrimination.
Hence treating her as though she were in receipt of the company's full maternity benefit when calculating the redundancy settlement.
OP she needs to see an employment lawyer. She'll need to do this anyway if she signs a Compromise Agreement.
She's in a great position.Hence treating her as though she were in receipt of the company's full maternity benefit when calculating the redundancy settlement.
OP she needs to see an employment lawyer. She'll need to do this anyway if she signs a Compromise Agreement.
She should push for her notice period, holiday pay, and then AT LEAST six months salary to be paid as an ex gratia payment which will be tax and NI free.
Can I point out that as soon as the agreement is paid and if you have any gardening leave and as such get paid for it, make sure that the company pays the correct amount of tax at the time.
The compromise agreement will state as soon as you sign the agreement the company are not liable for any miss-paid taxes or NI and as such you become liable...
HMRC just caught up with me due to an error in 2008 were my previous company paid me too much and the HMRC too little, I just had to fork out £1600 3 years after I finished working there, it was a good job I had the money as many people I know would not have it lying around for a rainy day.
You have been warned...
The compromise agreement will state as soon as you sign the agreement the company are not liable for any miss-paid taxes or NI and as such you become liable...
HMRC just caught up with me due to an error in 2008 were my previous company paid me too much and the HMRC too little, I just had to fork out £1600 3 years after I finished working there, it was a good job I had the money as many people I know would not have it lying around for a rainy day.
You have been warned...
Du1point8 said:
Can I point out that as soon as the agreement is paid and if you have any gardening leave and as such get paid for it, make sure that the company pays the correct amount of tax at the time.
The compromise agreement will state as soon as you sign the agreement the company are not liable for any miss-paid taxes or NI and as such you become liable...
HMRC just caught up with me due to an error in 2008 were my previous company paid me too much and the HMRC too little, I just had to fork out £1600 3 years after I finished working there, it was a good job I had the money as many people I know would not have it lying around for a rainy day.
You have been warned...
There's a way of thinking that you can't and shouldn't be paying HMRC direct on PAYE as an employee, only an employer should be doing thatThe compromise agreement will state as soon as you sign the agreement the company are not liable for any miss-paid taxes or NI and as such you become liable...
HMRC just caught up with me due to an error in 2008 were my previous company paid me too much and the HMRC too little, I just had to fork out £1600 3 years after I finished working there, it was a good job I had the money as many people I know would not have it lying around for a rainy day.
You have been warned...
andy-xr said:
Du1point8 said:
Can I point out that as soon as the agreement is paid and if you have any gardening leave and as such get paid for it, make sure that the company pays the correct amount of tax at the time.
The compromise agreement will state as soon as you sign the agreement the company are not liable for any miss-paid taxes or NI and as such you become liable...
HMRC just caught up with me due to an error in 2008 were my previous company paid me too much and the HMRC too little, I just had to fork out £1600 3 years after I finished working there, it was a good job I had the money as many people I know would not have it lying around for a rainy day.
You have been warned...
There's a way of thinking that you can't and shouldn't be paying HMRC direct on PAYE as an employee, only an employer should be doing thatThe compromise agreement will state as soon as you sign the agreement the company are not liable for any miss-paid taxes or NI and as such you become liable...
HMRC just caught up with me due to an error in 2008 were my previous company paid me too much and the HMRC too little, I just had to fork out £1600 3 years after I finished working there, it was a good job I had the money as many people I know would not have it lying around for a rainy day.
You have been warned...
If we the company f
k up your last few payments (not on purpose of course) and the HMRC do come after someone, since you signed the agreement that someone is you.Been there and done it once I read through the agreement and spotted that snippet of info.
Include a nominal payment in the package as consideration for agreeing to restrictive covenants in th CA(I'm sure there will be some). £100 should do it, which although taxable, should overcome any possibility of HMRC viewing the entire package as such consideration, and therefore taxable. Talk to the lawyer, although not all are aware of this.
Thank you all for taking the time to respond.
The wife accepted a slightly revised offer (as I stated in an earlier post) and we have now seen a solicitor (at the company's expense) regarding the agreement.
We have made a couple of ammendments - particularly around the ex gratia payment (that the company will support any challenge by HMRC that the payment is liable from Tax/NI) and also to amend some of the "the employee will" statements to "it is the employee's responsibility to".
We are also asking for the employer to provide evidence to support our assertion that the ex gratia paymnent is not taxable as part of the package.
Du1point8 - I did search for info and spotted your tale, hence it was something I was keen to talk to the solicitor about. I explicitly asked about that clause, which he said was standard in all compromise agreements and he thought it extremely unlikely we could have it removed.
Number 7, that's an interesting suggestion (sadly we had already seen the solicitor by that point). He is a specialist in employment law etc, but didn't make any suggestion like this - but seemed happy with the situation as it stands.
randlemarcus + Soovy - thanks and yes, we had already stipulated that professional and 2x personal references were to be included in the package. As the wife is parting on good terms, they were happy to supply these though.
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