How To Get The Best Redundancy Package PossiblePosted 24 Nov 2017 Lost your job? Trevor Johnson explains how to obtain the best redundancy package
Do you really have to take what you’re offered when the boss sits you down and explains that, with deep regret, they’re going to have to let you go?
The answer to that, according to the experts, is a resounding: “Not on your life.”
Studies have shown that redundancy packages are by no means set in stone and consultants stress that although obviously it varies by company and the seniority of your position, there’s often plenty of scope for you to thrash out a better redundancy deal than the one you were originally offered.
Says employment lawyer Jonathan Lewis, who specialises in redundancy deals: “The golden rule is don’t automatically agree to everything you’re offered. Play it cool. Ask to see the proposals in writing. Say you need to think about it - and then come back with some suggestions of your own.”
Experts say it’s vital that redundancy victims should understand what’s called their ‘negotiating leverage’. A study at Manchester Business School identified three key factors that can swing the balance when fighting for a good deal:
If you’re a long-time employee, the boss will probably feel bad about having to let you go. So keep things friendly, say you understand his predicament - and make them feel even worse.
Your colleagues will want you to be treated fairly. Failing to do right by redundancy victims can have a corrosive effect on the remaining staff. It has even caused them to jump ship in sympathy.
Legal claims by disgruntled redundant workers can be expensive and bring an employer unwelcome publicity. That’s why negotiations have increased by 10 per cent in the past year.
Jonathan says: “Bosses just don’t want the grief a legal claim can bring and will often pay a bit more to avoid it.”
Here’s some expert advice on how to get the best redundancy package:
Make sure you’re getting what you’re entitled to. For instance, anyone who has worked continuously for two years for a company is entitled to two years’ statutory redundancy. This doesn’t apply to contractors, casual workers, some civil servants or police officers.
A redundancy package gives workers below the age of 22 the right to half a week’s pay for each year of employment, a full week’s pay for each year for those aged between 22 and 40 and a week and a half’s pay for each year of work over the age of 41.
Always negotiate. “Most bosses hate to make people redundant,” Jonathan says. “Therefore, striking a bargain to leave quickly and quietly often produces higher payouts than deals that end in arguments, accusations and resentment.”
Look at voluntary redundancy. Generally, payments for a voluntary redundancy are larger than statutory redundancy payments and are offered to make it appear more financially attractive for you to agree to terminate your contract.
Says human resources consultant Anna Skelton: “If you’re considering taking voluntary redundancy, make sure you feel comfortable with the sum being offered and have factored taxation rates into all your calculations.”
That’s good advice because studies have shown that although a voluntary redundancy payment is often larger than compensation paid to a compulsory redundancy victim, the volunteer could be worse off when the taxman has taken his share.
This is because payment made to voluntarily resigning workers can be seen as a ‘terminal bonus’ by the Revenue, so can be subject to tax and national insurance contribution rates
Go for enhanced benefits. Instead of asking for a higher redundancy settlement, consider negotiating for higher non-cash and other benefits, Jonathan advises.
He says this is particularly tax efficient if your payout, via payroll, is likely to exceed the £30,000 tax free limit for redundancy payouts.
Extra benefits can include an enhanced pension or additional tax free lump sum paid into your pension pot, keeping your company car or mobile phone and even share payouts.
Companies are frequently happy to maintain an employee’s personal medical insurance, as premiums are paid annually, and an employer won’t lose out if the redundant worker retains the insurance until the end of the year. Sign a non-compete clause.
If you’re in senior or middle management, your boss may not want to see you jump ship after redundancy and join a major rival. Offering to sign a non-compete clause for six or 12 months can pay dividends, Jonathan says, who had a client who recently signed a yearlong agreement and almost doubled his exit package.
Press for a retraining payment. It’s sometimes possible to negotiate for financial help for retraining as part of a redundancy package and also get your employer to pay for a career development consultant to recommend an appropriate course.
Come to a settlement agreement previously known as a compromise agreement. If your employer is finding it hard to produce good reasons for your redundancy, you could consider agreeing to restricting your legal right to sue your boss for wrongful dismissal.
However, London redundancy counsellor Fiona Hopkins warns that you should only sign such a document in return for a substantial payment, as going down this route could restrict any future legal remedies against an ex-employer.
Remember that once you’ve signed a settlement agreement there’s no going back, which is why recent legislation insists you take independent legal advice on the terms and effects of the agreement.
Investigate voluntary severance packages. These are increasingly being offered to long-term employees who are close to retirement age as another alternative to going down the compulsory redundancy route.
Sums offered can range from one week’s salary for every year worked to up to a year’s pay. Anna advises: “If voluntary severance hasn’t been taken up by as many workers as your boss had hoped, you could be in luck when negotiating a higher offer.”
If your employer is going out of business, it’s worth seeing if you can salvage anything from the wreckage.
“I had one carpenter client who was building some stables when the company he was working for went broke,” Fiona remembers.
“As part of his settlement, he was able to convert the hay and food store into a very nice custom built workshop.” Read more like this< Back