Termination payments and benefits: example: redundancy payments: Statement of Practice 1/1994: conditional payments
EIM13785 explained the need to identify payments that are for something other than compensation for redundancy. The question often arises where payments are conditional on staying to a specified date. These may be within Section 62 ITEPA 2003 (see EIM00515) rather than Section 401 ITEPA 2003.
Company A is shutting a factory and making all the employees redundant. The redundancy scheme provides for:
- statutory redundancy payments in accordance with the Employment Rights Act 1996 (see EIM13760) plus
- non-statutory redundancy payments based on length of service and final salary (see EIM13775) plus
- a payment of £500 to each employee who stays to the redundancy date.
The payment of £500 is for continuing to serve as an employee and therefore falls within Section 62 ITEPA 2003. It is not compensating for the redundancy itself.
The facts are as in example 1 except:
- there is no £500 payment offered and
- the non-statutory redundancy payment is made conditional on the employee staying to the redundancy date.
In this case, the non-statutory redundancy payment does not change its character simply because the employee is required to meet a specific condition before it is paid. It is therefore within Section 401 ITEPA 2003.