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Redundancy - PILON

(3 Posts)
BetsyBoop Mon 22-Sep-08 20:42:48

I've just started an unpaid career break (from 3/9) after a year's maternity leave.

Looks like I'm like I'm going to be offered voluntary redundancy (which if I get offered what I think it should be I'd seriously consider) and I've been told that in addition to the contractual redundancy package I'll get 6 months pay in lieu of notice (PILON)

Should the PILON period count as reckonable service for my occupational pension scheme? I've checked my terms of employment & the only reference to PILON is that they "may opt to pay it" instead of making you work your notice in a redundancy situation.

I've done a bit of research myself & it's all along the lines of (from Business link)
"A PILON should cover salary - including any bonus required under their contract - until the end of the notice period together with the cash equivalent of benefits in kind, unless their contract says otherwise"

I can't find anything that specifically covers pension stuff, but logic says PILON should put you in the same position as if you had worked your notice (unless contract says otherwise), therefore should count for pension purposes & they should deduct my contribution from it?

It would be great if it did count, because after 8 years of crap (collective bargaining) pay rises we actually got decent ones for the past 2 years, so I'd rather like my pensionable pay to be based on a higher amount grin

Thinking about it, what happens to holiday entitlement and PILON as well?

thanks for reading this far & any light you can shed

flowerybeanbag Tue 23-Sep-08 10:04:32

Hi Betsy

Hmmm, interesting one.

The stuff about putting you in the same position as if you had worked the notice period specified would apply if the contract had been broken, but as they reserve their right to pay in lieu of notice in your contract, your contract hasn't been broken by their doing so - there is no wrongful dismissal.

When an employer pays you in lieu of notice your employment ends immediately, that's the whole point. So I would say that you don't continue to accrue pensionable service because you are no longer employed.

As your information from BusinessLink says, PILON should cover salary, bonus and cash equivalent of benefits in kind. Holiday wouldn't be included in that, that means stuff like company car/car allowance, private health insurance, that kind of thing.

My logic tells me that you don't need to continue to accrue holiday if you are not employed and not being required to work.

Where there is not a PILON clause, that's different, the contract is being breached so if an employer wants to do that without it being specified in the contract, they should negotiate an amount to reflect that, and include holiday pay as well probably, and pension contributions.

I would like to put a disclaimer in and say that if I were your employer at this point I would be ringing my solicitor to check these points in terms of recent case law - I wouldn't go ahead without reassuring myself and like you I can't find anything definitive that would satisfy me enough to proceed on that basis.

But that's what my logic is telling me at the moment.

Having said that, nothing stopping you negotiating and seeing if you can remain employed and therefore accruing pensionable service but being put on garden leave or ending your employment immediately but negotiating them to pay 6 months worth of contributions into your pension fund. If 6 months service is going to make a significant difference to your pension pot that is something you should take into account when deciding whether to accept voluntary redundancy and something you should raise as a concern if/when the offer is made.

Is it a case of a general offer to x number of people of a defined package or is it more targeted? A compromise agreement might well be involved, which obviously would give you the opportunity to discuss and negotiate these things.

Hope that helps a bit, sorry it's thoughts rather than a definitive answer!

BetsyBoop Tue 23-Sep-08 15:30:56

thanks Flowery {waves hello }

You've pretty much confirmed what I thought

It's a large exercise they are doing at the moment. I got my quote at noon today & have until 10am tomorrow to decide shock. I don't think it's really up for negotiation, as it's the same rules for everyone.

When I've checked the pension scheme rules an extra 6 months pension conts wouldn't make a huge difference to my overall pension (it's an 80th scheme) & the pay rise wouldn't count as pensionable pay as it's the best 12months in the past 3 years and the 6 months prior to the 6 months of PILON my pay was zero grin

I think I will take it as these schemes are few & far between. They have the usual "full & final settlement" clause in as you would expect, so once I've signed that's it...

I have noticed that I think they have my PILON wrong though, as it's based on my salary at the start of my m/l, not including the raise that happened during my mat leave that I should have got, so I've queried that grin

thanks again for your sound advice (as ever)

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