Settlement - how much is the legal norm?

[admylin]

Does any one know how much a lump sum setlement should be? Are there any guide lines? A friend is being offered 12 months salary if he leaves without a fuss. He's been at the company for 20 years and worked his way up to management. I think 12 months is not enough after spending his best years building up his career and the company.

I've seen it happen a few times & it's generally a bit more than you would get if you were made redundant (assuming there are no disciplinary type matters behind this, when people usually take whatever they can get rather than being "sacked" )

If he just gets the statutory redundancy pay out he can check what that would be here. However he should check his contract as his employer may offer more generous redundancy terms than the statutory rate, which is not overly generous.

At the end of the day it depends on how badly they want him to leave & how badly he wants to leave/stay, these things are always negotiable.

Thanks BetsyBoop, good to know. He's not being sacked as such as he's done nothing wrong but they seem to want to make his position free for someone they would rather have.
He has to figure out if it's worth fighting for more -or to just go quietly.

Is he a member of a union? Its amazing how much more companies are prepared to offer once the magic 'union' word is mentioned!

Yes he's a member and he's already got himself a lawyer but from that website on redundancy pay, he's being offered alot more than stated - maybe he should take it.

I don't know how much he earns, but also bear in mind that unfair dismissal compensation is capped at approx £60,000 plus notice period. The only exceptions are discrimination, plus a few rare situations like being penalised for raising health and safety concerns.

If they sacked him and he sued, his compensation would be based on his actual financial losses, up to this cap. Therefore, when working out whether this is a good deal, he needs to work out whether a year's salary is a good financial deal for him.

He also needs to look at the tax treatment. Normally, the first £30,000 of severance can be paid tax free. That is 'worth' approx £42,000 to a higher rate tax payer.

If he has worked 20 years then he should get 20 weeks plus notice period, so they are offering him double this. I personally think that offering effectively double isn't that generous even give the tax free bonus, and I agree with OP that it doesn't sound like the greatest deal. 2 years would be fair I reckon.

BUT your friend needs to weigh up the following:

1. Can he get another job pretty quickly?
2. will he have to take a job cut in any new job?
3. Does he have the stomach for a fight with a group of people he presumably has had previous good relations with?
4. It is very important that it is termed a redundancy as otherwise there may be implications for any mtgge cover insurance or benefit claims.

If I were him I would be feeling a bit floored because it is not nice to be told you no longer fit and that can cut really deep. fighting when in that situation would be tough.

If I were in this situation I would see if I could agree with company that I remain employed for a period of up to 4 months whilst I spend my workday looking for an alternative job (much much easier to get a job when you are in a job) and once I have a new job, THEN I take the package being offered. Can't imagine the company would have too much of a problem with that and it leaves everyone with a bit of credibility.

Squiffy - unfortunately, unless there is a company enhanced scheme, you don't get 20 weeks' pay.

The law on statutory redundancy pay is confusing for people because it talks about 'a week's pay per year of service' BUT it caps that pay at £310 per week. That equates to earning about £16,000 per year. Anyone earning more than that does not get "a week's pay", they get £310.

The complication that the amount increases to £460 per year for years of service aged 41 or over. Obviously, to get to 20 years of service, chances are that you will be 41 or older. Depending how old you are, you can therefore be earning more than £16,000 and still get a full week's pay per year under the statutory redundancy scheme.

If your suggestion is a defined period of 'working' whilst looking for another job and then payment, that sounds like a good suggestion for the OP. I am sure that the company would want a definite committment and compromise agreement though. They wouldn't want a situation where, at the end of the four months, you could turn around and say "actually, I haven't found anything so I'm staying put".

Also, severance payments are based almost solely on financial loss. If the employee can find a new job just as good in four months then that (less any paid but unworked notice period) is all he would get if he sued, no matter how unfair the dismissal. That might make an employer a bit loathed to pay a whole year.

I think that actually, a year is a good deal if the individual is confident he'll get another job. If he's not (particularly if he's older and concerned he won't find anything ever again) then I'd be inclined not to agree to a package at all.

Do bear in mind that if he has a long notice period in his contract, which he may well do if very senior, then they might not actually be offering him very much here at all over and above what he is entitled to anyway. He should speak to an employment lawyer.