Payment made to an employee for not resigning and continuing to serve...

Payment made to an employee for not resigning...

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Good afternoon all,

I have a client who has advised the workforce that it will be shutting down operations in, say, six months and, at that point, all employees will be made redundant.

In an attempt to mitigate staff leakage during the interim period, the employer has offered to make a payment to employees for not resigning and continuing to serve until the very end.

Prima facie, I'd say this is taxable as earnings, which seems to be borne out by HMRC guidance, but I was wondering if any one has any thoughts to the contrary, perhaps bringing the payments into the s401 £30k threshold?

I shouldn't imagine that employees' contracts of employment contain any right or otherwise to such payments, which gives me a glimmer of hope setting my brain off thinking the payments could be compensatory in nature, for the change of one's t's and c's etc etc?

Any thought, comments or suggestions would be very welcome.

Best regards

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Stepurhan
By stepurhan
13th May 2011 07:54

Payment for services rendered

it's effectively a payment for a variation in the employment contract. The employees are agreeing to not leave in the final period and are being financially compensated for doing so. I can't see any way that could be justified as a redundancy payment.

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