An employer had placed a number of staff on short-time working to avoid making redundancies. However, redundancy is now essential for some of these employees. Esther Smith and Matthew Whelan advise on how to calculate the redundancy pay.
The question:
We have had a number of employees on short-time since October 2008. The short-time working was to avoid redundancy. Two of the employees are now to be made redundant. In terms of calculating the redundancy and notice pay, should this be based on the three-day week salary or the five-day week salary prior to October 2008. I cannot find any authority on this area.
Legal advice:
Matthew Whelan, solicitor, Speechly Bircham
There is a concept known as ‘short-time’ which has a specific legal meaning. From what you have said, you are using this word in the more general sense, rather than to denote this particular concept. For example, for an arrangement to constitute short-time, an employee’s remuneration for the week needs to be less than half a week’s pay, which from what you say is not the case.
If, however, you do mean short-time in the specific sense, then the answer to this question would differ to that set out here. It is likely that, as long as the employee’s pay is fixed (i.e. he is paid an annual salary which does not vary according to the amount of work he does); and the employee has properly agreed to the changes, and not, for example, worked under protest meaning this change may not be valid; and you have not agreed with the employee that their redundancy and notice entitlement would be based on their previous salary, then his notice and redundancy payment should be based on his reduced salary. It is best to take advice, particularly if your understanding of the arrangement does not accord with the employees and they object.
Matthew Whelan can be contacted at Matthew.Whelan@speechlys.com. For further information, please visit Speechly Bircham
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Esther Smith, partner, Thomas Eggar
Yes, the calculation for redundancy pay and notice pay should be based on their contractual salary which will be their reduced pay since October 2008, on the assumption that when the changes were made in October 2008 they were deemed to be permanent changes to their terms and conditions.
It may have been your intention to increase the terms back up to full time if business improved (we might all have to wait a little while longer for that) so as long as you did not make a contractual commitment that they would increase after a certain time, or that the reduction was a temporary measure, it is the reduced pay that should be taken account of.
If the employees receive variable pay each week / month rather than a fixed equal instalment of a salary, then in order to determine a week’s pay you need to take an average over the previous 12 weeks, but this will not take you back prior to October 2008 so the calculations would still be on the current reduced salary even if that is variable.
Esther Smith is a partner in Thomas Eggar’s Employment Law Unit. For further information, please visit Thomas Eggar
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