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Ben Jones
Ben Jones, UK Lawyer
Category: Law
Satisfied Customers: 46151
Experience:  Qualified Solicitor - Please start your question with 'For Ben Jones'
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In August this year I will be 66 years old. I am currently

Resolved Question:

In August this year I will be 66 years old. I am currently still working full time, and after 17 years I am still with the same employer. I decided to continue working and chose the option to receive my old age pension, and I have no other pension facility.

My employer has asked me if I would consider terminating my employment in return for a lump sum payment of the equivilent of 9 months salary. He tells me that this would have to be put into effect in April as to do so before this date would incur 60% tax penalty whereas a settlement sum paid in April would not be subject to the same penalty.

I would like to know if this is in fact the case. I would also like to know what the situation is if I refuse to accept his offer. Would he be in his rights to sometime in the near future bring about a redundancy notice on me, or would his current offer have any bearing on this.

I am of the opinion that I am now surplus to requirements to the company even though he stresses the offer is on the table because of the possibility he may sometime soon pull the plug on the business due to the current marketplace climate/his deteriorating health. I have reason to doubt either of these issues are in fact the case.

Regards,

Derek Channell
Submitted: 3 years ago.
Category: Law
Expert:  Ben Jones replied 3 years ago.

Ben Jones :

Hello, my name is XXXXX XXXXX it is my pleasure to assist you with your question today. What would you like to achieve?

Customer:

I would like to know my situation if I refuse his offer.

Customer:

Is my employer right about the 60% tax situation if paid before April. Can the settlement sum be in fact paid in August without incurring the 60% tax penalty. Can he make me redundant if I refuse this offer.

Ben Jones :

Is this tax penalty something that applies under the pension policy?

Customer:

I do not receive a works pension, just an old age pension which I receive.

Ben Jones :

ok and has he said what this tax penalty is for exactly?

Customer:

He just informed me that if he paid me the 9 months salary before April it would incur a 60% tax penalty but that this would not be the case if it was paid in April

Ben Jones :

ok let me see if I can find anything on that, I will respond on here shortly

Ben Jones :

Just to check what is your total annual income in general?

Customer:

£26,796 pa (pre tax) + fully serviced company car + private fuel. There is laughably a bonus scheme in operation, but I have not received any bonus in the past 6 years. The company has to be in a profit situation to enable me to be in with a chance of earning this quarterly bonus, but apparently we have not been in a profit situation for 6 years. I know for a fact that our esteemed leader each month creams off the top line to feed his pension fund thus leaving us in the "non profit" position and therefore negating the need to pay me a bonus. I also know I would be hard pressed to prove this. It is obvious to me that I have reached the 'surplus to requirements' position, and this is his way of moving me out to graze.

Ben Jones :

Ok to be honest I have no idea what the employer is referring to when they mention this 60% tax. It does not appear to be a legal issue in terms of tax laws because the main timer you may be subject to an apparent 60% tax is if your income is above £100k a year, which is not the case here. It could be an internal budgeting matter but only the employer would know that. One thing is for certain though – if you are being made such an offer and asked to make a decision, you have the right to question the employer to justify the reasons why there is such a drastic tax treatment and obtain sufficient details to help you make an informed decision about your future. You certainly cannot be forced to accept this offer if you do not have sufficient information about it.


 


If you were to reject this and the employer was looking to terminate your employment I the future, then you will also have certain rights. If an employee has been continuously employed with their employer for at least 2 years they will be protected against unfair dismissal. This means that to fairly dismiss them their employer has to show that there was a potentially fair reason for dismissal and that a fair dismissal procedure was followed.


 


According to the Employment Rights Act 1996 there are five separate reasons that an employer could use to show that a dismissal was fair: conduct, capability, redundancy, illegality or some other substantial reason (SOSR). The employer will not only need to show that the dismissal was for one of those reasons, but also justify that it was appropriate and reasonable to use in the circumstances. In addition, they need to ensure that a fair dismissal procedure was followed and this would depend on which of the above reasons they used to dismiss.


 


The offer you are currently considering should have no impact on the employer’s future decisions on whether to terminate your employment and how to do it. Whatever you were offered now would not affect your legal rights in terms of protection against unfair dismissal.


 


Also you will have protection against age discrimination. If the employer is trying to force you out because of your age and the fact you may be considered too old for the company or your job, or that you are costing the company too much and so on, then that could certainly amount to potential age discrimination and it is further protection you get from the law.

Customer:

Thank you for your help. In all honesty I think much of wehat you have told me was pretty much anticipated, but I needed to make sure.

Customer:

Regards Derek

Ben Jones :

I hope it has at least clarified your position so you know where you stand

Customer:

Indeed.

Customer:

Thank you

Ben Jones :

You are most welcome, all te best

Ben Jones, UK Lawyer
Category: Law
Satisfied Customers: 46151
Experience: Qualified Solicitor - Please start your question with 'For Ben Jones'
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