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The Masked Tulip

I'll Take The 3 Years Salary As A Tax-Free Lump Sum Please

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This is an anecdotal but perhaps worth mentioning here.

A chap I know of who works for a public sector body in Wales, controlled by the Assembly, was offered redundancy yesterday - 3 years salary as a tax-free lump sum so he is getting around 70K to 80K to leave his job before April.

Apparently he was one amongst many who were made this offer yesterday.

Apparently they are champing at the bit to go because as from next April they only get 1 year's redundancy.

Nice sum to pay towards his mortgage or pay it off completely? Hasn't got a clue what he is going to do now.

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This is an anecdotal but perhaps worth mentioning here.

A chap I know of who works for a public sector body in Wales, controlled by the Assembly, was offered redundancy yesterday - 3 years salary as a tax-free lump sum so he is getting around 70K to 80K to leave his job before April.

Apparently he was one amongst many who were made this offer yesterday.

Apparently they are champing at the bit to go because as from next April they only get 1 year's redundancy.

Nice sum to pay towards his mortgage or pay it off completely? Hasn't got a clue what he is going to do now.

How long has he been there to get the 3 years? If it is 1 month per year of service it is still reasonable. But if he has just been there for 3 years, this is outrageous... (think Welsh assembly are funded by central gov and hence national tax money ?)

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I do not agree with this but what they must do is put a clause in the redundancy contract that states that they can not claim any benefits for at least 4 years to stop these people paying of the mortgage, buyng plasmas, cars, holidays, extensions, etc.

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This is an anecdotal but perhaps worth mentioning here.

A chap I know of who works for a public sector body in Wales, controlled by the Assembly, was offered redundancy yesterday - 3 years salary as a tax-free lump sum so he is getting around 70K to 80K to leave his job before April.

Apparently he was one amongst many who were made this offer yesterday.

Apparently they are champing at the bit to go because as from next April they only get 1 year's redundancy.

Nice sum to pay towards his mortgage or pay it off completely? Hasn't got a clue what he is going to do now.

They should only get the statuary minimum same as the majority of the working people of the uk

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How long has he been there to get the 3 years? If it is 1 month per year of service it is still reasonable. But if he has just been there for 3 years, this is outrageous... (think Welsh assembly are funded by central gov and hence national tax money ?)

Only been there for 2 years but has been in the same Govt department in England and moved to Wales, under the WAG control, about 2 years ago.

Been working for longer in England but no idea how long for.

Edit: He is 51ish so has 30 years tops, more like 25 years.

Edited by The Masked Tulip

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A chap I know of who works for a public sector body in Wales, controlled by the Assembly, was offered redundancy yesterday - 3 years salary as a tax-free lump sum so he is getting around 70K to 80K to leave his job before April.

I think that only £35K of that is tax-free under the redundancy rules. (May be a bit out of date).

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A chap I know of who works for a public sector body in Wales, controlled by the Assembly, was offered redundancy yesterday - 3 years salary as a tax-free lump sum so he is getting around 70K to 80K to leave his job before April.

I'd take a jolly good guess that the entire scheme is at the employer's discretion (there should be two levels of weasel words; first, line management signoff at some level is required, and second, the offer will be subject to HR approval).

And that the way it works is like so :-

Human Remains dept have some slots at the max-3x average payband; have more slots at the max-1x average payband mark; and a whole tonne of slots at their best estimate of the long slow grind of nonvoluntary redundancies.

Essentially, it's a reverse auction - from HR's perspective it's better if the first round is oversubscribed than not; this allows them to move the offer more toward (or even below) the average pay band than would otherwise occur.

Another piece of information gained (from the employer's side) in the frist round is getting folk to justify their own redundancies (by clicking through the click through) for the secondand subsequent rounds...

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Another piece of information gained (from the employer's side) in the frist round is getting folk to justify their own redundancies (by clicking through the click through) for the secondand subsequent rounds...

...sneaky...!

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I do not agree with this but what they must do is put a clause in the redundancy contract that states that they can not claim any benefits for at least 4 years to stop these people paying of the mortgage, buyng plasmas, cars, holidays, extensions, etc.

When I was made redundant a decade ago (so soon!) the dole office took into account not only my 3 months redundancy but also the pay in lieu of holidays that I was given. These were considered as employment for the period and I was not allowed anything until that calculated period had expired.

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I do not agree with this but what they must do is put a clause in the redundancy contract that states that they can not claim any benefits for at least 4 years to stop these people paying of the mortgage, buyng plasmas, cars, holidays, extensions, etc.

BTLs.....

Only saying, but this whole sorry business could easily re-kick-start that sorry business.

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The reason for the big payoff is to make people take VOLUNTARY redundancy rather than CONPULSORY.

Redundancy is a very explicit legal concept.

In order for someone to legally be "redundant" so you can MAKE THEM redundant against their will, you must be able to show there is no work for them now or in the immediate future, and you cannot then hire someone to do the work they did, or simiar work they could easily be trained to do, for at least 6 months.

Thus you cannot make all your staff redundant and then hire them back at a lower wage.

The only exceptions to this are:

=> Volunary Redundancy - Effectively, the employees agree to resign in exchange for a payoff.

=> Contractors - You can end their contracts with appropriate notice - as they are not "employed" by the company they don't have any redundancy rights.

Often "contractors" are actally permenant staff working for an outside supplier. Binmen are a good example of this. The company they are working at will simply end it's agreement with the "supplier" for the persons services. That "supplier" then has no work for the person who was working, and can legally make them redundant. When you hear about councils giving all their staff notice, this is what is happening... they aren't giving their own employees notice,they are telling the suppliers that they don't want 10 staff at £20 an hour thay want 10 staff at £10 an hour. The staff at £20 an hour are redundant as the contract they were working on for the council has ended.

Many councils have been actively transfering staff to external suppliers explicitly so they can do this...

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Redundancy is a very explicit legal concept.

In order for someone to legally be "redundant" so you can MAKE THEM redundant against their will, you must be able to show there is no work for them now or in the immediate future, and you cannot then hire someone to do the work they did, or simiar work they could easily be trained to do, for at least 6 months.

Nope. The easiest (and in this case the TRUE REASON) is that the company you work for has no money to pay your wages.

Doesn't matter if there is work for you or not - THEY CANNOT AFFORD IT.

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Nope. The easiest (and in this case the TRUE REASON) is that the company you work for has no money to pay your wages.

Doesn't matter if there is work for you or not - THEY CANNOT AFFORD IT.

...bit like UK PLC..... :rolleyes:

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I think that only £35K of that is tax-free under the redundancy rules. (May be a bit out of date).

Having recently enquired about voluntary severance, I was working on a figure of £30K, the rest at you marginal tax rate so he'll lose a lot of that. Payment can be staged so that some is in the following financial year to get your tax allowance and 20% band on the next £45K but will still leave a lot of 40% tax to be paid. No NI payments required AFAIK.

Other rules for dumping into pension etc but you don't get it in your hand obviously and sounds like he'll have a public sector D.B. pension anyway.

sounds good if you could walk into another job or survive on a pittance till your pension kicks in but otherwise that sort of money won't go far when you're used to earning £70K I bet.

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Having recently enquired about voluntary severance, I was working on a figure of £30K, the rest at you marginal tax rate so he'll lose a lot of that. Payment can be staged so that some is in the following financial year to get your tax allowance and 20% band on the next £45K but will still leave a lot of 40% tax to be paid. No NI payments required AFAIK.

Other rules for dumping into pension etc but you don't get it in your hand obviously and sounds like he'll have a public sector D.B. pension anyway.

sounds good if you could walk into another job or survive on a pittance till your pension kicks in but otherwise that sort of money won't go far when you're used to earning £70K I bet.

£30k is correct.

schmunk

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I think it depends on if it is voluntary redundancy or statutory redundancy though.

Voluntary Redundancy:

Any payout is effectively a one-off bonus payment to end your employment contract, hence it will be taxed as per your salary, i.e. taking into account what you have paid so far this year if PAYE. In this case this will easily go into the 40% bracket, so a lot of the payout will be taken back by the taxman.

Statutory Redundancy:

This where a plant is closed and workers are laid off with no say in the matter - 'real' redundancy if you want. This is the one where the first £30k is tax-free.

The details may not be exactly correct, but I was offered voluntary redundancy a couple of years ago (a few months after Lehmans collapsed) and we had to consider the two things above. After the PAYE tax, the voluntary payment was not as attractive as keeping a job in an unsteady job market.

Edit: It's quite interesting the offer is now, in the middle of the tax year, as the payment will probably get hit for the maximum tax, vs. if the offer was in May you'd still have most of you tax allowance to use up.

Edited by efdemin

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Statutory Redundancy:

This where a plant is closed and workers are laid off with no say in the matter - 'real' redundancy if you want. This is the one where the first £30k is tax-free.

I knew someone, [public sect, about 5 yrs ago got generous redundancy, voluntary, 30k tax free, dunno if it was a ruse tho'

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I do not agree with this but what they must do is put a clause in the redundancy contract that states that they can not claim any benefits for at least 4 years to stop these people paying of the mortgage, buyng plasmas, cars, holidays, extensions, etc.

why?

Voluntary Redundancy:

Any payout is effectively a one-off bonus payment to end your employment contract, hence it will be taxed as per your salary, i.e. taking into account what you have paid so far this year if PAYE. In this case this will easily go into the 40% bracket, so a lot of the payout will be taken back by the taxman.

That is incorrect - I accepted voluntary redundancy around the same time and did not have to pay any tax on it (26k)

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why?

That is incorrect - I accepted voluntary redundancy around the same time and did not have to pay any tax on it (26k)

First £30K tax free, though the notice period and holiday pay is taxed.

Knocks a lot off the expected money if you're not careful. And you presumably still need to find a job, so it's not a pile of free cash unless you are lucky enough to bag a job pretty quick. With redundancies en masse and high unemployment, that is far from a given. I was lucky enough ?!? to go through it when the economy was booming and I wouldn't recommend it to anyone.

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I think it depends on if it is voluntary redundancy or statutory redundancy though.

Voluntary Redundancy:

Any payout is effectively a one-off bonus payment to end your employment contract, hence it will be taxed as per your salary, i.e. taking into account what you have paid so far this year if PAYE. In this case this will easily go into the 40% bracket, so a lot of the payout will be taken back by the taxman.

Statutory Redundancy:

This where a plant is closed and workers are laid off with no say in the matter - 'real' redundancy if you want. This is the one where the first £30k is tax-free.

The details may not be exactly correct, but I was offered voluntary redundancy a couple of years ago (a few months after Lehmans collapsed) and we had to consider the two things above. After the PAYE tax, the voluntary payment was not as attractive as keeping a job in an unsteady job market.

Edit: It's quite interesting the offer is now, in the middle of the tax year, as the payment will probably get hit for the maximum tax, vs. if the offer was in May you'd still have most of you tax allowance to use up.

Thanks - useful info.

I expect that whilst the offer is made now the redundancy probably will not kick in until April 7th to minimise the tax issue.

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I think it depends on if it is voluntary redundancy or statutory redundancy though.

Voluntary Redundancy:

Any payout is effectively a one-off bonus payment to end your employment contract, hence it will be taxed as per your salary, i.e. taking into account what you have paid so far this year if PAYE. In this case this will easily go into the 40% bracket, so a lot of the payout will be taken back by the taxman.

Statutory Redundancy:

This where a plant is closed and workers are laid off with no say in the matter - 'real' redundancy if you want. This is the one where the first £30k is tax-free.

The details may not be exactly correct, but I was offered voluntary redundancy a couple of years ago (a few months after Lehmans collapsed) and we had to consider the two things above. After the PAYE tax, the voluntary payment was not as attractive as keeping a job in an unsteady job market.

Edit: It's quite interesting the offer is now, in the middle of the tax year, as the payment will probably get hit for the maximum tax, vs. if the offer was in May you'd still have most of you tax allowance to use up.

I imagine the way round the voluntary bit is to issue a HR1 notice for redundancies in general as mine did.

As to the tax issue my co was willing to pay some now and some in April to optomise the tax position.

We were offered 5 weeks pay per year of service upto a max of 3 years. Not public sector btw.

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why?

That is incorrect - I accepted voluntary redundancy around the same time and did not have to pay any tax on it (26k)

Well good for you. But it depends on how you were paid. In the situation I was in, it was pay in lieu of notice hence it was taxable as per normal pay.

Anyway, there are more details here, note how many exclusions there to keep the redundancy pay taxed & NI'd:

http://www.hmrc.gov.uk/individuals/redundancy-ee.htm

Also see this: http://www.guardian.co.uk/money/2001/aug/15/redundancy.careersadvice2

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Well good for you. But it depends on how you were paid. In the situation I was in, it was pay in lieu of notice hence it was taxable as per normal pay.

Anyway, there are more details here, note how many exclusions there to keep the redundancy pay taxed & NI'd:

http://www.hmrc.gov.uk/individuals/redundancy-ee.htm

Also see this: http://www.guardian.co.uk/money/2001/aug/15/redundancy.careersadvice2

I would have thought that all Public Sector workers have a contract of employment that gives them a right to compensation on ceasing to be employed or payment in lieu of notice and hence makes it all txable?

I could be wrong but isn't this the sort of thing that the unions have negotiated for public sector workers? Or have public sector bosses negotiated themselves a situation where all public sector employees can get a big tax-free lump sum?

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Nope. The easiest (and in this case the TRUE REASON) is that the company you work for has no money to pay your wages.

Doesn't matter if there is work for you or not - THEY CANNOT AFFORD IT.

What a retarded statement.

Redundancy is a narrowly defined legal concept.

The word REDUNDANT speaks for it self... the word redundant refers to something that is not needed as there is no use for it any more.

If a company has work for it's staff, the staff are not redundant... they have work to do... the company can't "make them redundant", else THERE WILL BE NO-ONE TO DO THE WORK. If it has work it needs staff to do but can't pay them then it's bankrupt.

If a company can share a persons work out amongst other staff then that worker is technically redundant as there is no longer work for them to do... others are now doing the work. Usually when this happens it's because the other workers had slack, (usually due to a decrease in business/customers or IT improvements) or less important work that the other workers were doing gets pushed aside. The company cannot, however, then hire someone else back in to do the work, as the person made redundant would have a clearcut case for unfair dismissal.

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