We are making job cuts. Can we legally offer statutory minimum redundancy packages rather than enhanced levels?
Employers need to offer enhanced redundancy payments if employees have a contractual right to receive them. This depends on whether they have an express contractual right to enhanced payments or whether the employer has, through ‘custom and practice’, created an implied contractual right to enhanced payments over time.
It is important to note that an employer will not inadvertently create a contractual obligation if it considers whether and how to make enhanced payments each time.
If the employer routinely pays redundant employees enhanced payments on a consistent basis without considering whether to do so and in accordance with a clear and established policy that has been communicated to staff, this is likely to create a legal obligation.
Express contractual redundancy payments may be included in contracts of employment or redundancy policies.
Employers that make enhanced payments on a discretionary basis must be careful to avoid discrimination issues when deciding how to exercise their discretion. For example, if older staff receive greater enhanced payments, this could be discriminatory on grounds of age.
Enhanced redundancy payments that follow the statutory formula but remove the cap on a week’s pay, increase the multiplier, or multiply the total redundancy payment calculated along one or both of the preceding lines by more than one, are likely to be permissible.
Pulina Whitaker, employment partner at King & Spalding