Withholding enhanced redundancy pay
Conditional package. Tata Steel is collectively consulting on around 2,800 proposed redundancies, but employees have now voted in favour of industrial action. Tata Steel has responded by saying it will take its enhanced redundancy package (ERP) off the table if staff go on strike as the package is “conditional upon there being no industrial action” .
Contractual right. If ERP is a contractual entitlement, e.g. under the terms of an enhanced redundancy payments policy, you can’t just unilaterally withdraw it. Even if your policy is expressed to be discretionary only (see The next step ), or even if it’s unwritten, if you’ve regularly paid ERP in the past, in a future redundancy exercise employees could argue it’s become contractual through established custom and practice.
Tip. Making an ERP on a single occasion won’t give rise to a custom and practice on the next occasion. This is because, to become an implied contractual term, it must have been drawn to employees’ attention and followed without exception for a substantial period - it must be “reasonable, notorious and certain” .
Tip. Don’t make ERP automatic. Consider the exercise of your discretion on each occasion, make clear to affected staff that’s what you’ve done and vary the terms each time (ensuring they’re always a more generous variant of the statutory redundancy pay scheme to comply with the Equality Act 2010 ). Ideally, sometimes pay only statutory redundancy pay.
Settlement agreement. Assuming ERP isn’t a contractual right, if you’ve made it as an ex gratia offer but that offer hasn’t yet been accepted by the employee, you should be able to withdraw it. For example, you could make it conditional on them entering into a settlement agreement. That is legally acceptable and indeed is a recommended course of action where you’re paying more than statutory minimum entitlements.
For an enhanced redundancy payments policy, visit https://www.tips-and-advice.co.uk , Download Zone, year 26, issue 10.
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