Redundancy & PILON - but no employment contract

[Rob S]

A friend of mine has been told she is going to be made redundant from her job at a small company. She has been there for five years, but has never had a written contract - just a letter of appointment that sets out hours, holiday and salary.

She has a meeting on Friday to discuss options etc and is of the mind to try and negotiate an exit package so she can leave that day. However, as there is no contract, then there is no PILON clause, which would I believe,make it difficult to receive a tax free lump sum.

Is my understanding correct?

Is there another way this can be achieved?

 

[Newchodge]

No

A redundancy settlement is tax free up to a total package of £30,000.

If there IS a contract which allows PILON, then tax must be deducted from the PILON element of the settlement.

If there is no contract allowing PILON then PILON is a breach of contract and the payment can be taxfree as it is compensation for breach of contract.

 

[Rob S]

Many thanks for the reply. It was very useful and I hope she managed to negotiate a good exit package.

This company are fairly bad with legislation. It will be interesting to see how it pans out.