The Total Cost of Redundancies
Claire Glennon, Human Capital Services : 3rd Nov 2008
The current economic climate means that all organisations, including Family Businesses are facing difficult times.
Recession may lead to redundancies and everyday we are hearing of more and more job losses. As an employer, there are obligations that you must adhere to to ensure that your organisation is not put at unnecessary risk from failing to comply with the current employment legislation regarding redundancies. The “headline” cost of redundancies is the amount that has to be paid out in statutory redundancy payments, which depends on employees’ age, service and weekly pay. However are you aware that most redundant employees will have additional entitlements other than redundancy payments?
HCS provides you with a check-list below:
- Notice or pay in lieu of notice - this will be statutory minimum notice (1 week for each complete year of service up to a maximum of 12) or contractual notice, whichever is greater. If paying in lieu of notice, the amount can be paid tax free unless there is a specific clause in the contract stipulating that notice will be paid rather than worked.
- Holiday Pay – remember to pay accrued holiday pay up to the point of the dismissal.
- Other Benefits – the employee will be entitled to other contractual benefits (e.g. private use of company car, pension contributions, life cover, private healthcare etc.) during any notice period, and may be entitled to compensation for the loss of these if no notice period is served.
- Bonus – if the employee participates in a contractual bonus scheme there may be a pro-rata entitlement to bonus for the year in which the employment ends (although it is perhaps less likely that bonus targets will be met in a time of recession).
- Early Retirement – if the redundant employee participates in a final salary pension scheme he/she may, depending on the scheme rules, be able to access pension benefits following redundancy and in some cases this can trigger a “strain on fund” liability on the employer.
The message HCS is providing to employers is clear – while redundancies may be unavoidable, you need to be aware of the full costs. If you are considering redundancies in your workplace, contact HCS today on 0141 776 6456 to discuss or alternatively email enquiries@humancapitalservices.co.uk or visit our website: www.humancapitalservices.co.uk .
06 November 2008, webeditor
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