compromise agreements (redundancy)
 

Hi
Anybody got any knowledge on compromise agreements, I have been sent home facing redundacy, worked for firm 18 months. They have sent me a compromise agreement which offers me 3 months money (my 3 months notice period) which would be taxable. Meanwhile I sign away all my rights.

What is the word, I know see a solicitor, but whats the real word.

Cheers

Mark

Did you discuss this with your (former) employers in a 'without prejudice' meeting? It seems strange to just send you it out of the blue...

Essentially the can make you redundant by following a prescribed course of consultation with everyone who is employed to perform the duties of the role that is being made redundant. Once it is agreed who should be made redundant there is then a minimum statutory redundancy payment (which is not a lot). The reasons for wanting someone to sign a compromise agreement can be nefariou - like they want you out and are not actually making your job redundant at all. If they make you 'redundant' then employ someone else to do your job then you can take them to the cleaners.

I know about this stuff from the other side. I had to make someone redundant (genuinely) but the complication was that he was a shareholding director of the company so we settled the matter in 'without prejudice' meetings (which means neither party can use it in court) and drew up a compromise agreement to the satisfaction of both sides. Loosing a founding member of the company can be like a messy divorce and the agreement kept it clean.

Like you said: Go see a solicitor - preferably one who specialises in employment law.

Good luck!

Check this site out for info.
http://www.dti.gov.uk/

[Edited on 12-2-2006 by final_edition]

[Edited on 12-2-2006 by final_edition]

I have no advice to give through knowledge but, good luck dude. You have my sympathy - I've been in the same situation myself on two occasions.

Mark

Sorry to hear about this.

Very good advice from Rally

The first rule is to act fast and DON'T sign anything until you have sought professional advice.

Is there anyone else being made redundant in the business, or in your department?

Do you have a contract of employment? It is a legal requirement that you have one. If you don't have one, then ask for one immediately.

Do you have a copy of the companies policy on redundancy / grievance procedures etc. If you do see a solicitor he will also want to see the above.

As you have worked for the company for more than 12 months you are entitled to redundancy pay. This is normally one weeks pay for every year of employment. This would be in addition to any pay in lieu of notice and outstanding holiday pay.

As Rally says in his post there has to be consultation with any affected parties to this which should be done over a reasonable period of time. i.e. 4-6 weeks or more if possible.

Have you been told recently or had a general meeting or letters informing you that the company is in trouble?

Do they operate a last in first out policy?

I am like rally in that I'm also in management and have had to make people redundant, but I always make sure that the person involved gets every thing he is entitled to. It's traumatic enough without being 'stitched up' by the company.

You would be amazed at how many companies leave themselves open to unfair dismissal claims because they don't follow the rules.

If you want to u2u me your address I can quickly send you a copy of the procedures which your company should be following and which will also detail your entitlements. The procedural information was given to me by our legal advisors and is very comprehensive ( Even I understand it ). You could also look on the ACAS website.

Also don't forget that if they do ask for a meeting with you ( for which you must have advance notice - not ''come in this afternoon '' ) then you are legally entitled to have someone with you. There is nothing worse than being outnumbered . I know, I've been there.

Don't forget that u2u mark if you think it will help

Best of luck

Phil

Mark - I cant add much more to this.

We have been doing this last year with key personnel, and now we are just waiting for the windup order for the rest of the staff in our company due to being sold out to a major player, with completion going through by mid March.

Lifes bugger innit? Chin up mate

C:)

the deal being offered although not the best scenario ever obviously does look and sound like a good deal mate.

3 months pay after an 18 month contract isn't bad at all. Confused why your are to be taxed on it though, i was under the impression all redundancy pay was tax free.

I'm still praying for it at my place :)

So good info on business link site
http://www.businesslink.gov.uk/bdotg...mId=1075081896

Also do a search on google for compromise agreement you should find quite a bit of info
Best of luck

hopefully seeing a solicitor tomorrow
will let you know


Mark

Redundancy is tax free upto £30k

Mark may have a contract which states that either party has to give three months notice of termination of contract ( i.e. if mark found another job he would have to work three months notice )

If the employer wishes to terminate the contract he can either let you work your notice, or say to you 'You can go home now and we will pay you your wages in advance for the three months, but you don't need to come into work '

Therefore this amount will be classed as wages and be taxable. ( I think )

Redundancy pay will be any payments in addition to this e.g. The equivalent of one weeks wages for every year of service.

Depending on your circumstances you may also be entitled to a tax rebate at a later date.

The above implies no knowledge of any employment law or tax issue and if anyone wants to sue me if it's wrong then don't bother cos all my money is in a tin box buried under a rock on a mountain in Wales. It's a big pointy one with grass at the bottom,trees in the middle and rocky bits at the top.

Phil;)

Happened to me last year, and I thought the world had ended!

I got sat down in a meeting with my (former) boss and the lady from HR and they said that they'd done a "job matching exercise" and that my skills didn't match anything they had on offer... which was strange because they hired a graduate to do my job once I'd left (some synics would say it was because they only paid them half...)

Basically I got a compromise agreement and went straight to a solicitor. I had a long chat with him and he said that I would have a case for unfair dismissal, but after having just been stabbed in the back I really didn't want my old job back, working for what is now a sinking ship. I didn't want the lengthy court proceedings or tribunals. The money recompense was good enough to see me through 6 months without worry, so I signed it and got on with my life.

The funny thing is that I walked into another job after 4 weeks off (enjoying the sun and watching the cricket!) doing roughly what I did before, with a 25% payrise working for a better company with nicer people and less hassle all round. I work in San Francisco for one month in 3, and I'm really enjoying it!

The moral is that things happen for a reason and I reckon that in 3 months time you'll look back on this as a positive life changing experience.

Good luck!

Currently looking at a similar issue with my partner who is being retured due to ill health, she was injured while at work.

There are instances where tax is payable on redundancy even below the £30k limit. Typical balls up in the legislation but what do you expect it is England under labour after all.

Apparently it all depends on whether the way redundancy is paid out is described in your contract or "terms and conditions" of employment. If it clearly states that tax is payable then you are up against it. If not then you shouldn't be paying tax.

Pay in lieu of notice is not redundancy payment. It is pay. Simple as that. However, if it is pay as compensation for inconvenience that is somewhat different and not subject to tax. Such a payment might occur if they wanted him offsite immediately or terminated the contract but, wouldn't let him work for a competitor for reasons on intellectual knowledge. AIUI.

Were you a contractor or full time staff?

I don't think a company has to pay you redundancy if you have worked for them for less that two years and then it is something stupid like £200 for every year you have worked for them, anything more is up to them.

I got made redundant about 4 years ago, I was paid about £5K which included my final months salary and I was taxed on a percentage of it.

Good luck anyway Mark, it's a horrible feeling but I'm sure it will work out for you.

Dave

PS If you're a telecoms engineer and know about microwave radios, I might be able to help;)

Dear Mark

I have more experience of this subject than is healthy. I have executed compromise agreements with many staff and had a couple executed against me.

There are a lot of excellent points on this post and you should make your solicitor aware of them.

Be aware that in order for the compromise to be legally binding your employer is obliged (subject to certain limits) to pay for you to see a solicitor.

At risk of being repetitive do not sign anything until your solicitor is happy.

The way in which your compromise agreement is structured could save you a lot of tax.

If you are not totally sure about things once you have seen your solicitor email me your phone number and I would be very happy to talk it through with you.

Kind Regards and Good Luck

Dave