Redundancy and payment in lieu of notice question
Discussion
I have been advised my role is being made redundant, which will be confirmed next week.
My contract states I am on 12 weeks notice. Due to the nature of my role, my employed has offered me payment in lieu of notice.
I understand this to mean that they will pay me my 12 weeks notice, plus redundancy etc but my contract is effectively terminated immediately, I am no longer an employee, and free to work elsewhere.
My question is am I entitled to the benefits that I would normally have during my notice period such as accrued holiday and pension contributions?
There is nothing in my contract or employee handbook that mentions this. On one hand I can argue that if I am entitled to 12 weeks notice, then this should include all the benefits that come with the job, on the other, if I am allowed to not work and leave early I think they may argue that the benefits don't apply.
Searching the internet seems unclear, I have found comments that argue both ways. This HR site below states that annual leave should accumulate until the end of the notice period, and not the termination date.
http://www.xperthr.co.uk/faqs/topics/4,32/holiday-...
I want to be sure what I am entitled to before I agree to anything, so any advice appreciated.
My contract states I am on 12 weeks notice. Due to the nature of my role, my employed has offered me payment in lieu of notice.
I understand this to mean that they will pay me my 12 weeks notice, plus redundancy etc but my contract is effectively terminated immediately, I am no longer an employee, and free to work elsewhere.
My question is am I entitled to the benefits that I would normally have during my notice period such as accrued holiday and pension contributions?
There is nothing in my contract or employee handbook that mentions this. On one hand I can argue that if I am entitled to 12 weeks notice, then this should include all the benefits that come with the job, on the other, if I am allowed to not work and leave early I think they may argue that the benefits don't apply.
Searching the internet seems unclear, I have found comments that argue both ways. This HR site below states that annual leave should accumulate until the end of the notice period, and not the termination date.
http://www.xperthr.co.uk/faqs/topics/4,32/holiday-...
I want to be sure what I am entitled to before I agree to anything, so any advice appreciated.
This is a little complex. Firstly PILON is not an 'official' term, it has no meaning in tax law for example. There are broadly two possibilities, the first is that it is a payment of your required notice period and you are effectively on gardening leave. In that case your benefits should continue to the end of the 12 week period. This would be the case if your contract gives the employer an option to make PILON.
But if the contract is silent on this the payment could be compensation for the employer breaching the contract by terminating the contract immediately. If it is this then your termination date is immediate and no further benefits accrue, however the amount you get is subject to your agreement, you can negotiate whatever you want. The other advantage to you is that since it is compensation for the employer breaching your contract it may be tax free along with your redundancy pay up to £30k.
So it's important to understand what the basis of the payment is and it's tax treatment. If it is compensation for early termination of the contract although you may lose some benefits you will get a lot more money due to it's more favourable tax treatment.
But if the contract is silent on this the payment could be compensation for the employer breaching the contract by terminating the contract immediately. If it is this then your termination date is immediate and no further benefits accrue, however the amount you get is subject to your agreement, you can negotiate whatever you want. The other advantage to you is that since it is compensation for the employer breaching your contract it may be tax free along with your redundancy pay up to £30k.
So it's important to understand what the basis of the payment is and it's tax treatment. If it is compensation for early termination of the contract although you may lose some benefits you will get a lot more money due to it's more favourable tax treatment.
If you're getting more than statutory redundancy, then I think you have to take what you're given.
I had 3 months PILON, and for this I was not paid my housing subsidy or my car allowance, I had no health insurance or life cover, no laptop, no blackberry and no access to the office.
However, I did have 19months salary, with the first £30,000 tax free and the remainder taxed @ 20% (I did have to pay some more tax, but not for 15 months).
I argued my point with HR, that effectively it wasn't a notice period because I was contractually entitled to these benefits, but they really weren't interested. The employment lawyer that they paid for me to see told me to shut up and take the money (I am quite comfortable that he was independent, even though I didn't pay the bill).
So, what's happening to you is standard practice, I still don't think it's "fair", but it's exactly what happens.
I had 3 months PILON, and for this I was not paid my housing subsidy or my car allowance, I had no health insurance or life cover, no laptop, no blackberry and no access to the office.
However, I did have 19months salary, with the first £30,000 tax free and the remainder taxed @ 20% (I did have to pay some more tax, but not for 15 months).
I argued my point with HR, that effectively it wasn't a notice period because I was contractually entitled to these benefits, but they really weren't interested. The employment lawyer that they paid for me to see told me to shut up and take the money (I am quite comfortable that he was independent, even though I didn't pay the bill).
So, what's happening to you is standard practice, I still don't think it's "fair", but it's exactly what happens.
Thanks for the replies, it seems this is a slightly complex topic.
I am only getting paid statutory redundancy.
There seems to be a whole other minefield as to whether PILON is taxable or not. There is no mention in my contract of it which seems to be the important factor, so I'm also reading that I should be able to receive a tax free payment. I have printed off a number of articles to take to the meeting with my employer.
I am only getting paid statutory redundancy.
There seems to be a whole other minefield as to whether PILON is taxable or not. There is no mention in my contract of it which seems to be the important factor, so I'm also reading that I should be able to receive a tax free payment. I have printed off a number of articles to take to the meeting with my employer.
It won't be called PILON, or shouldn't be. You are either going on gardening leave in which case you are being paid for your notice period and it is taxable. Or you are being compensated for your employer dismissing you immediately in which case it is not taxable.
Obviously HMRC will want it to be taxable so you need to be sure that your employer knows what they are doing if the intent is to deliver it to you tax free.
Obviously HMRC will want it to be taxable so you need to be sure that your employer knows what they are doing if the intent is to deliver it to you tax free.
Marf said:
AFAIK PILON is taxable, because it is not a redundancy payment, it is as described payment in lieu of notice, it is simply three months salary being paid up front.
This is what I've always worked to. Payment in lieu of notice is salary, therefore a contractual payment and taxable. Redundancy payments are not salary and are treated differently, that is, are not taxable.This article is interesting, particularly the paragraph below. It says to me that unless PILON is provided for in my contract (it isn't) or is customary (not sure what the definition of this is) then it is not taxable.
http://www.nidirect.gov.uk/notice-and-notice-pay
Is your notice pay taxable?
If you work your notice, you'll be taxed at the usual rate on the money you earn in your notice period. PILON is only taxable if it's been provided for in your contract or is customary. Otherwise, it is not taxable unless the PILON together with redundancy and other compensation adds up to more than £30,000, in which case anything over £30,000 is taxable at the usual rate.
http://www.nidirect.gov.uk/notice-and-notice-pay
Is your notice pay taxable?
If you work your notice, you'll be taxed at the usual rate on the money you earn in your notice period. PILON is only taxable if it's been provided for in your contract or is customary. Otherwise, it is not taxable unless the PILON together with redundancy and other compensation adds up to more than £30,000, in which case anything over £30,000 is taxable at the usual rate.
garreth64 said:
This article is interesting, particularly the paragraph below. It says to me that unless PILON is provided for in my contract (it isn't) or is customary (not sure what the definition of this is) then it is not taxable.
http://www.nidirect.gov.uk/notice-and-notice-pay
Is your notice pay taxable?
If you work your notice, you'll be taxed at the usual rate on the money you earn in your notice period. PILON is only taxable if it's been provided for in your contract or is customary. Otherwise, it is not taxable unless the PILON together with redundancy and other compensation adds up to more than £30,000, in which case anything over £30,000 is taxable at the usual rate.
Yes, which is what I have said twice now! HMRC Websitehttp://www.nidirect.gov.uk/notice-and-notice-pay
Is your notice pay taxable?
If you work your notice, you'll be taxed at the usual rate on the money you earn in your notice period. PILON is only taxable if it's been provided for in your contract or is customary. Otherwise, it is not taxable unless the PILON together with redundancy and other compensation adds up to more than £30,000, in which case anything over £30,000 is taxable at the usual rate.
If the PILON is a contractual payment then it is taxable, if it is damages for the cessation of the contract it is not (up to £30k).
garreth64 said:
This article is interesting, particularly the paragraph below. It says to me that unless PILON is provided for in my contract (it isn't) or is customary (not sure what the definition of this is) then it is not taxable.
http://www.nidirect.gov.uk/notice-and-notice-pay
Is your notice pay taxable?
If you work your notice, you'll be taxed at the usual rate on the money you earn in your notice period. PILON is only taxable if it's been provided for in your contract or is customary. Otherwise, it is not taxable unless the PILON together with redundancy and other compensation adds up to more than £30,000, in which case anything over £30,000 is taxable at the usual rate.
If your PILON is "compensation" for breach of contract then stands to reason you won't accrue holiday pay etc because your contract has been terminated at your leaving date.http://www.nidirect.gov.uk/notice-and-notice-pay
Is your notice pay taxable?
If you work your notice, you'll be taxed at the usual rate on the money you earn in your notice period. PILON is only taxable if it's been provided for in your contract or is customary. Otherwise, it is not taxable unless the PILON together with redundancy and other compensation adds up to more than £30,000, in which case anything over £30,000 is taxable at the usual rate.
Amateurish said:
If your PILON is "compensation" for breach of contract then stands to reason you won't accrue holiday pay etc because your contract has been terminated at your leaving date.
If the PILON is 'compensation' then it isn't actually PILON and can be negociated at any rate you like. So it could just happen to be 'whatever I would have got if I had worked my notice, including xxx and yyy.' Watchout for Mr Taxman though, who might have a different view.Gassing Station | Jobs & Employment Matters | Top of Page | What's New | My Stuff