Employment query
Discussion
Hi all,
I have a question, on behalf of my partner.
Her work is getting shut down and she has been offered a settlement as she doesn't want to move to another department.
She has been given a generous settlement agreement which is quite a lot more than a statutory redundancy.
Only issue is, when she was getting the settlement confirmed by a solicitor, he said that the PILON amount was based on a month's notice (which is in her contract) but the amount should be higher as she has worked for the company for a long time, so it supercedes the month's notice. I think the amount in the PILON should be about £6k higher.
Or, at least, I think that's what he meant!
He said that the worst that can happen is that HMRC take a look at the settlement and calculate that the she should be paying more.
I'm a bit concerned by it. I know her employer is trying to do her a favour, but I don't want her ending up in legal ramifications.
What would you do here? Leave it, or ask the employer to re-work it out so that the amount she receives is the correct one. The solicitor even said she should keep money aside incase HMRC come asking for it, so it's not like she use all of it anyway.
Cheers
I have a question, on behalf of my partner.
Her work is getting shut down and she has been offered a settlement as she doesn't want to move to another department.
She has been given a generous settlement agreement which is quite a lot more than a statutory redundancy.
Only issue is, when she was getting the settlement confirmed by a solicitor, he said that the PILON amount was based on a month's notice (which is in her contract) but the amount should be higher as she has worked for the company for a long time, so it supercedes the month's notice. I think the amount in the PILON should be about £6k higher.
Or, at least, I think that's what he meant!
He said that the worst that can happen is that HMRC take a look at the settlement and calculate that the she should be paying more.
I'm a bit concerned by it. I know her employer is trying to do her a favour, but I don't want her ending up in legal ramifications.
What would you do here? Leave it, or ask the employer to re-work it out so that the amount she receives is the correct one. The solicitor even said she should keep money aside incase HMRC come asking for it, so it's not like she use all of it anyway.
Cheers
I'm not sure why "Pay in lieu of notice" should be higher than the Notice period. 
Stat redundancy DOES vary with age and length of service but you say she's already getting more than this?
Also your post is confusing me - is the issue that the Employer isn;t paying her enough PILON or that they're not deducting enough tax?
Stat redundancy DOES vary with age and length of service but you say she's already getting more than this?
Also your post is confusing me - is the issue that the Employer isn;t paying her enough PILON or that they're not deducting enough tax?
Rusty_ said:
Hi all,
Only issue is, when she was getting the settlement confirmed by a solicitor, he said that the PILON amount was based on a month's notice (which is in her contract) but the amount should be higher as she has worked for the company for a long time, so it supercedes the month's notice. I think the amount in the PILON should be about £6k higher.
Or, at least, I think that's what he meant!
He said that the worst that can happen is that HMRC take a look at the settlement and calculate that the she should be paying more.
Cheers
Yes, this is a thing but I think it's just the solicitor covering all the bases - i.e if you do end up being looked at by HMRC, then you can't go back to them and complain that they didn't mention it. Only issue is, when she was getting the settlement confirmed by a solicitor, he said that the PILON amount was based on a month's notice (which is in her contract) but the amount should be higher as she has worked for the company for a long time, so it supercedes the month's notice. I think the amount in the PILON should be about £6k higher.
Or, at least, I think that's what he meant!
He said that the worst that can happen is that HMRC take a look at the settlement and calculate that the she should be paying more.
Cheers
He is right that there is some definition of how long notice periods "should be" (based on length of service) that is there to prevent people reducing their PILON and replacing it with the tax free settlement amount. But that's not what you are doing.
i.e. Based on what you are saying, you have a contracted notice period (which you pay income tax on) and a settlement amount (which you don't). This is fine.
When I have come across this in the past, everyone I know just ignored it and took the settlement amount (tax free).
Rusty_ said:
Sorry, I know I'm not explaining it well.
She's getting a higher tax-free amount, but the PILON amount should be higher, apparently.
I don't really know why!
Ah ok yes that makes sense! if I was you I'd put the extra tax to one side for a couple of years just in case HMRC come calling.She's getting a higher tax-free amount, but the PILON amount should be higher, apparently.
I don't really know why!
Suspect you're mixing the "1 week of pay statutory minimum redundancy per year of service" that is employment law, with PILON which as others have said is just your normal notice period in your contract.
Definitely have a look at what her statutory minimum redundancy would be (eg 14 years service equals 14 weeks gross pay) and compare that to her offer to be sure it is as generous as you think.
Definitely have a look at what her statutory minimum redundancy would be (eg 14 years service equals 14 weeks gross pay) and compare that to her offer to be sure it is as generous as you think.
Peterpetrole said:
Suspect you're mixing the "1 week of pay statutory minimum redundancy per year of service" that is employment law, with PILON which as others have said is just your normal notice period in your contract.
Definitely have a look at what her statutory minimum redundancy would be (eg 14 years service equals 14 weeks gross pay) and compare that to her offer to be sure it is as generous as you think.
This. PILON is based on your notice period, in her case 1 month. This is separate to any redundancy payment.Definitely have a look at what her statutory minimum redundancy would be (eg 14 years service equals 14 weeks gross pay) and compare that to her offer to be sure it is as generous as you think.
PILON does have tax and NIC deductions.
Redundancy pay does not have tax and NIC up to the first £30k.
Statutory redundancy is based on years/week's pay and is capped at a weekly rate which may or may not be lower than the actual week's pay.
MustangGT said:
Peterpetrole said:
Suspect you're mixing the "1 week of pay statutory minimum redundancy per year of service" that is employment law, with PILON which as others have said is just your normal notice period in your contract.
Definitely have a look at what her statutory minimum redundancy would be (eg 14 years service equals 14 weeks gross pay) and compare that to her offer to be sure it is as generous as you think.
This. PILON is based on your notice period, in her case 1 month. This is separate to any redundancy payment.Definitely have a look at what her statutory minimum redundancy would be (eg 14 years service equals 14 weeks gross pay) and compare that to her offer to be sure it is as generous as you think.
PILON does have tax and NIC deductions.
Redundancy pay does not have tax and NIC up to the first £30k.
Statutory redundancy is based on years/week's pay and is capped at a weekly rate which may or may not be lower than the actual week's pay.
The solicitor is correct; OP’s other half just needs to tell her employer that her legal advisor has pointed this out and the PILON should be adjusted. This is literally why you are required to have a lawyer review settlement agreements before you sign anything
Edited by parabolica on Thursday 12th December 17:06
Thanks everyone.
So, she will need to advise the employer to increase the PILON amount and reduce the tax-free bit.
Am I right on saying that it is the employer's responsibility to ensure she is paying the correct amount of tax in this situation, and that the worst outcome for her (of the PILON isn't changed) is just that HMRC come asking for the higher amount?
Tbh, we can't be arsed with any agro!
So, she will need to advise the employer to increase the PILON amount and reduce the tax-free bit.
Am I right on saying that it is the employer's responsibility to ensure she is paying the correct amount of tax in this situation, and that the worst outcome for her (of the PILON isn't changed) is just that HMRC come asking for the higher amount?
Tbh, we can't be arsed with any agro!
Rusty_ said:
Thanks everyone.
So, she will need to advise the employer to increase the PILON amount and reduce the tax-free bit.
Am I right on saying that it is the employer's responsibility to ensure she is paying the correct amount of tax in this situation, and that the worst outcome for her (of the PILON isn't changed) is just that HMRC come asking for the higher amount?
Tbh, we can't be arsed with any agro!
Getting the correct PILON shouldn’t mean her tax-free payment is reduced - the two items should be treated separately. The law says she is due X in respect of PILON which it appears they have undervalued (could be an honest mistake) and they have already communicated to her an amount payable for the settlement component. There is no reason why they should reduce one to fund the other. So, she will need to advise the employer to increase the PILON amount and reduce the tax-free bit.
Am I right on saying that it is the employer's responsibility to ensure she is paying the correct amount of tax in this situation, and that the worst outcome for her (of the PILON isn't changed) is just that HMRC come asking for the higher amount?
Tbh, we can't be arsed with any agro!
All she needs to do is tell her employer her legal advisor has picked up on this and all she doing is passing on the information - she shouldn’t need to fight for this. If they get arsey tell them to communicate directly with her lawyer on the matter.
This is coming from someone on the HR side; she isn’t asking for anything unreasonable here.
ETA yes it is the employers responsibility to ensure the correct amounts are being paid and taxed correctly (I assume she is an employee and not under some other complex employment arrangement), but it is the employee that HMRC will come after as Countdown notes below.
Edited by parabolica on Thursday 12th December 19:40
Rusty_ said:
Thanks everyone.
So, she will need to advise the employer to increase the PILON amount and reduce the tax-free bit.
Am I right on saying that it is the employer's responsibility to ensure she is paying the correct amount of tax in this situation, and that the worst outcome for her (of the PILON isn't changed) is just that HMRC come asking for the higher amount?
Tbh, we can't be arsed with any agro!
If any tax is underpaid HMRC come after the Employee, not the employer So, she will need to advise the employer to increase the PILON amount and reduce the tax-free bit.
Am I right on saying that it is the employer's responsibility to ensure she is paying the correct amount of tax in this situation, and that the worst outcome for her (of the PILON isn't changed) is just that HMRC come asking for the higher amount?
Tbh, we can't be arsed with any agro!
parabolica said:
MustangGT said:
Peterpetrole said:
Suspect you're mixing the "1 week of pay statutory minimum redundancy per year of service" that is employment law, with PILON which as others have said is just your normal notice period in your contract.
Definitely have a look at what her statutory minimum redundancy would be (eg 14 years service equals 14 weeks gross pay) and compare that to her offer to be sure it is as generous as you think.
This. PILON is based on your notice period, in her case 1 month. This is separate to any redundancy payment.Definitely have a look at what her statutory minimum redundancy would be (eg 14 years service equals 14 weeks gross pay) and compare that to her offer to be sure it is as generous as you think.
PILON does have tax and NIC deductions.
Redundancy pay does not have tax and NIC up to the first £30k.
Statutory redundancy is based on years/week's pay and is capped at a weekly rate which may or may not be lower than the actual week's pay.
The solicitor is correct; OP’s other half just needs to tell her employer that her legal advisor has pointed this out and the PILON should be adjusted. This is literally why you are required to have a lawyer review settlement agreements before you sign anything
Edited by parabolica on Thursday 12th December 17:06
The PILON will not impact the tax free amount as the PILON is the contractual payment (i.e. the payment of the period of notice that would have otherwise been made as normal salary and taxed in the same way had it been worked instead of not being worked) and will be subject to the normal deductions same as holiday pay.
it is the ex-gratia payment that will be 30k tax free.
it is the ex-gratia payment that will be 30k tax free.
Rusty_ said:
Hi all,
I have a question, on behalf of my partner.
Her work is getting shut down and she has been offered a settlement as she doesn't want to move to another department.
She has been given a generous settlement agreement which is quite a lot more than a statutory redundancy.
Only issue is, when she was getting the settlement confirmed by a solicitor, he said that the PILON amount was based on a month's notice (which is in her contract) but the amount should be higher as she has worked for the company for a long time, so it supercedes the month's notice. I think the amount in the PILON should be about £6k higher.
Or, at least, I think that's what he meant!
He said that the worst that can happen is that HMRC take a look at the settlement and calculate that the she should be paying more.
I'm a bit concerned by it. I know her employer is trying to do her a favour, but I don't want her ending up in legal ramifications.
What would you do here? Leave it, or ask the employer to re-work it out so that the amount she receives is the correct one. The solicitor even said she should keep money aside incase HMRC come asking for it, so it's not like she use all of it anyway.
Cheers
I can answer this from recent experience. Get her solicitor to go over her original contract, with a fine tooth comb. In my case, I signed to say I had to give 1 weeks notice, for every year I was there ( 24 years ). So the upshot was, I did get an uplift on the original settlement figure, because of my original contract. As long as it’s her solicitor driving it, they should also have a solicitor, and it could be beneficial to raise it.I have a question, on behalf of my partner.
Her work is getting shut down and she has been offered a settlement as she doesn't want to move to another department.
She has been given a generous settlement agreement which is quite a lot more than a statutory redundancy.
Only issue is, when she was getting the settlement confirmed by a solicitor, he said that the PILON amount was based on a month's notice (which is in her contract) but the amount should be higher as she has worked for the company for a long time, so it supercedes the month's notice. I think the amount in the PILON should be about £6k higher.
Or, at least, I think that's what he meant!
He said that the worst that can happen is that HMRC take a look at the settlement and calculate that the she should be paying more.
I'm a bit concerned by it. I know her employer is trying to do her a favour, but I don't want her ending up in legal ramifications.
What would you do here? Leave it, or ask the employer to re-work it out so that the amount she receives is the correct one. The solicitor even said she should keep money aside incase HMRC come asking for it, so it's not like she use all of it anyway.
Cheers
Hi all
Just to follow on from this thread.
My partner mentioned this to the employer but we think the total amount paid was still wrong.
Basically, to summarise, partner was offered a settlement agreement from her employer and we suspect the taxable/tax-free amounts are wrong.
We think, the tax-free settlement amount is a little bit higher than it otherwise should have been and the PILON paid is based on 1 month and not 3. The employer said this was fine, but a solicitor said it needed adjusting, which we don't think has happened.
What shall we do here? I don't want agro from HMRC, but I also don't want to open a can of worms.
What shall we do? Approach HMRC, or see if they notice it?
Is the worst case scenario they send her a unpaid tax bill?
Thanks
Just to follow on from this thread.
My partner mentioned this to the employer but we think the total amount paid was still wrong.
Basically, to summarise, partner was offered a settlement agreement from her employer and we suspect the taxable/tax-free amounts are wrong.
We think, the tax-free settlement amount is a little bit higher than it otherwise should have been and the PILON paid is based on 1 month and not 3. The employer said this was fine, but a solicitor said it needed adjusting, which we don't think has happened.
What shall we do here? I don't want agro from HMRC, but I also don't want to open a can of worms.
What shall we do? Approach HMRC, or see if they notice it?
Is the worst case scenario they send her a unpaid tax bill?
Thanks
Rusty_ said:
Is the worst case scenario they send her a unpaid tax bill?
Just to add - they wouldn't be able to identify it from the monthly payroll submissions. they would have to do a payroll audit (and these seem almost non-existent nowadays). And even after doing the payroll audit they would have to check your partner's contract against the payments made. I would say the odds of them picking this up are infinitesimal, and that's assuming it's your solicitor who is correct and not her employer.
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