7. REDUNDANCY PAY, INSOLVENCY, TAXATION AND STATE BENEFITS

This Chapter looks at statutory and contractual redundancy payments, including new case law about establishing an implied contractual right to redundancy pay based on custom and practice. It also addresses insolvency, taxation and state benefits.

The UK has a statutory redundancy pay scheme. Any redundancy pay over and above this depends on the employment contract or the employer’s discretion.

According to the OECD forum of industrialised nations’ employment protection indicator, the UK scheme is not generous. UK law provides the third least stringent employment protection of all its members, behind only the United States and Canada. This makes the UK one of the cheapest developed economies in which to carry out redundancies.

Employers that recognise trade unions are likely to pay better redundancy terms than employers where no union is present. LRD’s Payline facility contains many examples of contractual redundancy agreements. For information on how to subscribe, see the Further information section at the end of this booklet.