If you’re being made redundant from your employment and have been offered a compromise agreement in return for some financial or non-financial benefit then you will want to know that you’re being paid the correct sums in the agreement. Your employer has a duty to inform you that you should obtain independent legal advice on your compromise agreement from a qualified lawyer but it also doesn’t do any harm to educate yourself on what you should expect to be paid before consulting a lawyer. You will normally therefore see the following sums in your compromise agreement if you’re being made redundant:

  1. Accrued but unpaid wages
  2. Accrued but untaken holiday pay
  3. Your notice pay
  4. Statutory or contractual redundancy pay
  5. Any other contractual benefit during the notice period
  6. An ex-gratia sum in compensation for the loss of your employment

Accrued but unpaid wages

You should be paid the entirety of your accrued but unpaid wages (net of tax and national insurance at the appropriate rate) in your last payslip. If your employer fails to pay you this (although there’s usually not a problem with such payments) then you would have the right to make a claim for unlawful deduction from wages to the Employment Tribunal.

Accrued but untaken holiday pay

You should be paid for the (pro-rata’d) accrued but untaken holiday that you have outstanding up to the date of the termination of your contract of employment.

Your notice pay

If you have a contractual entitlement to a particular amount of notice pay then you should be paid this amount. For example, if your contract stipulates that you should be paid 4 weeks’ pay upon being notified of the termination of your contract of employment then this is what you should be paid. If there is nothing in your contract relating to notice (or you’ve never been supplied with a contract) then you should be given the applicable statutory notice – one week’s notice for every year you’re in continuous employment (for example, if you were employed for over two years but less than three years you should receive three weeks notice). Your employer can choose to pay you your notice pay “in lieu” or ask you to serve your period of notice (potentially on garden leave).

Statutory or contractual redundancy pay

If you’ve been made redundant and you’ve been employed for two years or more then you should receive redundancy pay from your employer. If your contract stipulates the amount of redundancy pay you should receive then this what the calculation should be based on. If your contract does not stipulate the amount of redundancy pay then you should be paid the correct amount of statutory redundancy pay. Click here to determine what this is.

Any other contractual benefit during the notice period

You should be paid all of your other contractual benefits during your notice period – for example, if you have use of a company car under your contract then you should either be allowed to use the company car after this period or you should be paid an equivalent sum of money. Normal issues upon redundancy relating to contractual benefits include the payment of bonuses, share options and/or commission.

An ex-gratia sum in compensation for the loss of your employment

Your employer is not obligated to pay you this but an ex-gratia payment may be made in the following circumstances:

  1. If you’re entering into a compromise agreement, to compensate you for the waiving of your employment rights (especially if you think that you’ve got a strong claim for unfair dismissal or any other claim)
  2. As a gesture of good will by your (ex-)employer or as a “sweetener” to enter into the deal

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The Direct 2 Lawyers Employment Team post daily on interesting employment law cases, Employment Tribunal judgments and Employment Appeal Tribunal judgments. All of the Employment Team posts are written by qualified specialist employment lawyers

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