Settlement - WWYD

[NamechangedforET]

Hi

I have posted previously about my situation and am very grateful for the advice received (I have no-one to speak to irl). The thread was long so I thought it might be helpful to start a new one with the latest issue.

In summary, I have raised an ET claim against my employers. They have offered £50k to settle (a without prejudice offer- which they assure me would not impact upon my ongoing employment with them). They have asked for a response to the offer by 6 January. If we do not reach an agreement the case is due to be heard in June of this year. I am a litigant in person.

The issue for me is that they haven't broken down the component parts of the offer so I can't work out what the tax implications will be. I therefore don't know what I would actually receive- and depending on the tax there could be a significant difference. In September I asked ACAS to ask them to do this (as recommended in the ACAS Guidance, p15, which says the following:

'It is therefore advisable for a settlement agreement to :

• Clearly specify any constituent elements that make up the overall settlement payment;
• State whether any particular element is to be paid either with or without deductions for tax and ni;
• and, if deductions are to be made, wherever possible state the actual sums that are to be paid and to be deducted.

I received an email from ACAS today that said:

'They anticipate that you would receive approximately £41,400 of the £50,000 offer made to you previously. They are not guaranteeing this figure but have come to it based on the first £30,000 being tax free and the remainder being subject to deductions.

They have not provided a breakdown of how the figure of £50,000 was arrived at.'

I would probably accept £41,000 but obviously they are not guaranteeing this figure and if I end up being taxed at the higher rate it would be significantly less (around 26k? which I would not accept - I would prefer the case was considered by the ET even if I ended up with less and/ or potentially lost the case). I think, as I am still in employment, the first 30k may not be tax free. This is based on online research - I have approached HMRC for advice but they have said they cannot help. I don't have nor can I afford a lawyer or accountant (I wasn't paid for nearly a year). In these circumstances, given they appear unwilling to provide a breakdown of the offer, I am minded to say I can't accept the offer - but is that unreasonable? I dont know what is standard practice in such cases. Thank you in advance for any advice you may be able to give or experience you can share.

So they are settling but you are keeping your job?
If so I would likely settle - if advantageous ask for payment in two instalments in January and April (next tax year).
You will have to get advice before signing.

The first £30k of any settlement offer is tax free. You will pay tax at the correct rate on the remaining £20k, which will of course depend on your current tax code/earnings.

You will need a solicitor to advise you on the settlement before signing to make it legally binding and your employer should pay, or offer a sum towards this advice, depending on how much the solicitor you choose charges.

Have they provided a copy of their proposed settlement agreement? If not request this and speak to a solicitor for advice, sharing the document with them.

can you get them to put it into your pension?

Thank you for your response. I am not sure that the first 30k is tax free if it's not a 'termination' payment?

I had a settlement. And as it wasn't redundancy it was taxable in full at the appropriate rate. I refused it and said I want this figure net of deductions, say in your case £50,000 and they paid me the equivalent to make it so, or thereabouts. They are likely claiming it from an insurance policy anyway so they won't mind.

You could try Citizens Advice if you want some free guidance? It’s definitely the kind of thing they will be able to help with!

What sort of case is it? Discrimination?

Unfortunately my employers won't talk to me about it - I can only ask questions through ACAS . I have asked ACAS to ask them about whether it could be put in my pension but was told my employers had responded saying they want it to be paid' in the 'usual way'. I said to ACAS that I didn't know what this meant as I haven't been through this process before and was told that ACAS dont know what it means either - that they cannot advise on tax issues (CAB said the same). I asked ACAS to see if they could get clarification on what was meant, could they break the offer down into component parts and got the response set out above.

It's a disability discrimination case- but they won't break the offer down by its component parts so I can't work out what the tax implications would be?

I would reply that you can't respond by January 6th unless they give you a breakdown, along with the tax implications and you want to know the net amount. Otherwise you are happy to wait until the tribunal in July, you have no immediate need for the money.

Thank you. I suspect, despite what my employer has said to ACAS, my case is similar to yours in that it is likely to be taxable in full at the appropriate rate (which is probably also why they have said they can't give any guarantees about the amount likely to be received).

My employer is public sector so I don't know if they claim it from an insurance policy or not. At the moment they are not being very helpful about the tax issues/resisting suggestions that it should be net of deductions so perhaps it is not covered by insurance? I don't really know.

If this is an ex-gratia payment to compensate for discrimination and your employment is not being terminated, the entire amount can be paid tax free. The £30k limit only applies if your employment is being terminated.

Thank you. Literally all they have said is that it's a without prejudice offer to settle the case. I think therefore they would continue to deny discrimination?

They have no legal obligation to admit fault. They're paying you a settlement which is blame-free on both sides, very normal.

Id take the money and call it quits, especially as they've agreed you keep your job in addition to the ex gratis.

I would prefer the case was considered by the ET even if I ended up with less and/ or potentially lost the case.

So you'd walk away from a large settlement and put yourself through a Tribunal even though you perceive there's a risk you could lose? I don't get that logic at all!

You might be able to get them to agree to pay it as pre-termination injury to feelings (thus entirely tax-free) but employers don't generally like doing this because they see it as an admission of fault and it sometimes triggers regulatory obligations. Otherwise you're going to have to pay tax.

Employers have deep enough pockets to pay for legal advice and there's no way an employment solicitor worth their salt would advise a payment labelled as "injury to feelings" in a settlement agreement just to save the employee from tax - employers have to get dragged kicking and screaming through a Tribunal and even then they won't admit any wrongdoing, they just pay up to get rid of the problem.

No one is ever going to see the COT3 @daisychain01. Employers can and do do it (yes, even after legal advice).

My only thought to add to the mix is that employer's don't put their best offer forward at the first offer stage.