Reduced hours and redundency payments

[postggj]

I have been helping out one of our canteen staff. She has been working in our canteen for the last 20 years and was told they were closing the canteen and she will be made redundant

 

i step in and agree a compromise in that her hours would be reduced from 38 hours to thirty for which she would receive 104 weeks wages based on 8 hours a week lost.

 

Alls fine untill she gets the agreement sent by email.

 

The payment based on 104 weeks will be subject to tax and ni.

 

The way i see it, buying down these hours is buying her out of her contract of employment and is a form of redundency

 

and as the payment is less than £30000

 

is exempt from tax and n1

 

comments people

[postggj]

quick bump

[Sidewinder]

Just based on a quick read, I would say that if she is continuing to work there in any capacity, then redundancy cannot be an option so any payments would be subject to tax and NI. This is more of a 'bonus' than 'damages' unless there is a severance from the contract and a break between one position and another.

[Mark&Janice]

She is continuing in the same job, how can this be classed as redundancy

[postggj]

its buying hours out of her contract of employment from 38 to thirty hours, so in a sense they are making her redundant by eight hours a week

 

may i ask how this can be classed as a bonus when the only allternative would be full redundancy

 

the damages would be loosing eight hours

[Sidewinder]

Perhaps 'Bonus' was the wrong word!

 

Redundancy can only exist where a dismissal is involved. This is not a redundancy as the employee is to continue in employment with length of service intact. What you have here is a variation of the employment contract where the employer, having agreed to accept a reduction in hours as an alternative to dismissal, is agreeing to cover wages that would have been earned had he not been making changes.

 

Redundancy would have been a viable option, however the there is an obligation to seek any reasonable means by which the employee can continue in employment, so in negotiating a reduction in hours, you have helped them to achieve that goal. An alternative would have been to vary the employee's working hours, and having not reached agreement to do so, terminated the contract and offered re-engagement at the reduced hours - the employee could then reject that and seek a claim for Unfair Dismissal. In making an ex gratia payment however, this would leave the employee very little room to succeed with such a claim, as (a) the employer has offered continued employment AND has offered to mitigate losses arising from the breach of the original contract, and (b) they could probably demonstrate a reasonable business decision for having sought to change the contract in the first place anyway.

 

HMRC would simply not accept your assertion that you can make a position partially redundant, so would not allow the payment to be made net of taxation without a clear break in service and the employee being re-engaged further down the line. The position here would be that the payment represents wages which the employee would have earned had the 38 hours continued to be worked, and she would have had to pay tax and NI on those earnings in those circumstances.

 

I can see your point, but it has no legal foundation.