Redundancy – Forfeiture of Pay

[Note – extra points were added to the article on 14/10/2019 & 16/10/2019]

Empty blue rowing boat on an empty sea.  Soothing picture butjumping ship too early may result in forfeiture of entitlement to redundancy pay.

Being made redundant is usually an unwelcome event for indviduals. In the midst of an unpleasant and, sometimes, numbing experience, an individual has to absorb his/her options and best course of action. Concern about getting another job can lead to an individual leaving early and not realising that an he/she may forfeit the entitlement to redundancy pay. Some staff at Thomas Cook were angered by a similar experience per a recent report. [1]

Entitlement to Redundancy Pay

The legal principles governing the entitlement to redundancy pay are clear. You must have:

  • At least 2 years of continuous employment with your current employer or with an associated employer;
  • Received notice of dismissal on grounds of redundancy or:
  • Been informed that your employment will terminate due to redundancy on a date that you can identify clearly from the information that you have been given.

However, you may lose your right to redundancy pay if your leave your employment too early. Consider how those points apply to the situations of Janine and Leroy.

Leaving Early to Start Another Job

Has Janine Jumped Ship Too Early?

Janine had worked for 7 years in a small call centre answering customer’s queries about their orders and delivery arrangements. The processes were being automated so that customers could go on line and get an answer automatically to common questions. When the system testing is complete, the staff had been informed that staff numbers would be reduced . Janine and another colleague started to look for another job in the local area for family reasons. Talk circulated that the project was almost complete. Janine and her colleague were offered a job in a nearby company, doing very similar work and with a small increase in salary. The new employer wanted Janine to start within two weeks. Her manager agreed that she could leave by giving two weeks notice and so Janine left after two weeks. Her final pay included untaken holiday pay and her normal pay up to and including her leaving date. No redundancy pay had been included. Her manager was adamant that she was not due any redundancy pay.

Whether to accept another job offer or wait and see is a common dilemma for individuals in this situation. Should they proceed to line up another job and then give notice to leave their current position? Janine’s individual circumstances and financial pressures may mean that it would be sensible to secure a job without a gap in her regular income. However, her employer would not be liable to pay her any redundancy pay because:

  • There has only been general talk about redundancies becoming necessary – no definite date has been given to Janine for the terminaton of her employment due to her role becoming redundant ;
  • Neither has Janine been informed that her role will come to an end on a particular event or time that she could calculate from any discussions or corrrespondence with her managers;
  • Janine took the risk of leaving before seeing if she would be made redundant as she wanted to secure a job. In other words, Janine’ jumped ship too early’
  • The consequence was that Janine lost the right to be paid any redundancy pay. Janine was still entitled to receive any untaken annual leave due up to her leaving date.

Is there a more effective approach by managers and staff to a similar situation? See the later note below.

Leroy Leaves Before His Notice Expires

Leroy is a car sales executive and has been in this job for two and a half years. The owner of the showroom and business is retiring and has sold the premises to a developer to build flats and two shops. The owner approached one or two contacts of other car sales businesses but those were not recruiting staff until nearer the next number plate change. All the staff have been given the required notice of termination according to their length of service or contractual notice period, if longer. Leroy had been given notice of fours weeks – longer than his legal entitlement.

Leroy received a call from another car dealership, attended an interview and accepted the offer of the job. A three day familiarisation course on the new models of cars was being held in three weeks time. Leroy’s new manager made it clear that Leroy would be expected to attend that. Leroy did not wish to lose the opportunity to start in this job. He saw no harm in leaving in two weeks time to attend the course as he was already under notice of termination. When he spoke to his current manager about leaving, Leroy was informed that as he was leaving before his notice period expired, the company would not pay him any redundancy pay. Leroy did not come within the few exceptions to that legal principle.

Minimise Your Risk of Losing Redundancy Pay

It is helpful to both staff and managers if a clear explanation is given of the ‘beware’ points in a redundancy situation. One such point is to remind staff that they should not ‘jump the gun’ by resigning before they have been informed of the date on which the individual’s employment will end as leaving earlier will lead to loss of any entitlement to redundancy pay.

Utilising Management’s Discretion

That is the legal position but managers can take the initiative to help staff in this situation. For example, a discussion could have been held with Janine about seeing whether her new employer is prepared to wait until she receives notice of her redundancy. Then Janine and her manager could discuss whether it is practicable for Janine to work until her redundancy takes effect or whether there is a compromise. In some situations, it may be practical to bring the redundancy date forward but that will depend on how critical the individual is to the operation before the reduced staffing takes effect.

Leroy may have been wiser to see if his current and future manager would agree to him attending the course for three days and then work out the rest of his notice period. The new company may have even agreed to reimburse his current employers for his salary for those three days or a similar arrangement so that neither the current employer nor Leroy were out of pocket. Alternatively, Leroy could have requested to use his right to take time off for training for the future job. His employer would in law only be bound to pay 2/5 of a week’s pay to Leroy i.e. he would be paid for 2 out of the three days. In the circumstances, either of the employers may have agreed to reimburse Leroy for the 3rd day of training. Even if Leroy had not been required to attend the training course, he could have requested paid time off to look for another job and/or attend an interview. His employer would have been liable to pay up to 2/5 of a week’s pay – the maximum sum even if was allowed to take more time off.

A Tough Time for Staff and Managers

A caution for managers is that you are likely to come across some individuals who are facing dire consequences in their lives before they learn of the redundancy situation. For example, marital issues and/or the loss of the family home due to falling behind with rent or mortgage payments. Such situations are difficult for the indivdual but also for managers who may feel that they are way out of their depth on such issues. In such cases, it may be helpful to allow the individual time off to seek advice from the local Citizens Advice service

In my experience, managers can feel very uncomfortable when speaking about redundancies to colleagues/ friends with whom they have worked closely for many years. Senior managers need to bear in mind that those managers may also feel stressed in the situation and need support or at least some encouragement.

In a redundancy consultation, individuals will not always grasp what has been said as their minds become pre-occupied with the effects they foresee on their and their family’s lives. Managers should be prepared to go over the same points on more than one occasion and to give the options and entitlements in writing so that the individual can read those again and also discuss them with a family member, friend or a representative.

Weigh Up the Risk v Benefit

For Janine forgoing her entitlement to redundancy pay may have been a better course of action as she had obtained another job nearby. If she had stayed, there was no certainty that she would have been made redundant and equally no guarantee that she would have kept her job. Individuals need to weigh up the risk. In the example of Janine, she denied herself the entitlement to 7 weeks of redundancy pay plus 7 weeks notice notice pay.

In Leroy’s situation, it is probable that the two managers would have come to an agreement to release Leroy for the course if he had approached them early. If Leroy leaves early without agreement, he would lose his entitlement to both his statutory redudancy pay of 2 weeks and the additional gift of 2 weeks of notice (i.e. 4 weeks in total) given by his current employer. He would be entitled to pay up to and including his last day of employment plus any leave due but not taken.

It has to be an individual decision but it helps an indvidual to know what is at stake if leaving early is a consideration.

[1] ‘Thomas Cook staff ‘held to ransom’ over exit payoffs’ report iby Mason Boycott-Owen and Michael O’Dwyer, Daily Telegraph Business Section pubished 8th October 2019.
[2] For more information on the amount of redundancy pay and other conditions see the summary on Key HR Facts

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