Redundancy - PILON vs Garden Leave Question

[Freelancer87]

Hello,

Here's a scenario I need some help with -

When making somebody redundant (large contact lost, sales are down and we have to get rid of a an employee) -

• Employee has worked with us for 3 years and is 39 years old
• Contact says we both have to give a four week notice

This employee has access to many private records, financial data and customer base. We have to protect that upon making this employee redundant.

Would 'garden leave' be appropriate or PILON? What is we put her on garden leave during her notice period but then he goes to the doctor and claims 'stress leave'. How would that work?

Do I need to worry about this or is it the same thing?

Thanks!

 

[Newchodge]

PILON ends the contractual relationship immediately - a clean break.

Garden leave maintains the relationship until the actual date of termination.

You need to decide what is best for your organisation.

If the employee goes sick during their notice period you still need to pay their statutory notice pay, so it would have little effect

 

[Freelancer87]

Hello Cyndy,

Does doing it one way or the other expose us to any kind of legal action?

Another question about this is can we introduce a restrictive covenant at this stage?

When do we have to present them with their final cheque? Is it the same day we advise them they have been made redundant? If I understand the process, I need to pull them into a meeting to discuss the possibility of redundancy first?

Many thanks for your insight.

 

[Newchodge]

You cannot do PILON unless the contract allows you to do so. If you give PILON in breach of contract it is actually better for the employee as it allows you to make the payment without deducting tax and NI. Weird, but our tax laws are weird.

You cannot introduce a\ restrictive covenant at this stage. The only way to do this would be to offer the employee a compromise agreement, under which you offer them more than their statutory or contractual entitlement, in return for which they agree a restrictive covenant. If you are considering doing that you need proper legal advice.

The final payment can be made whenever is most appropriate, as long as it is done at or before the next payroll date. So, if they are normally paid on the last day of the month, their final settlement can be made on the last day of the month, or earlier.

 

[Freelancer87]

Hi Cyndy,

Our contracts do not mention PILON at all. With that being said, I suspect garden leave would be the best way forward so as to avoid any issues. Does that seem a good way forward?

The contact says that the employer and employee must give a four week notice to terminate the contract of employment. I suspect that we must pay the four weeks, put her on garden leave (to protect the business' interests). When would we pay her for that? At the end of the four week period (but pay her the unused holidays and redundancy pay)? This is all so murky

Thanks for the help

 

[Newchodge]

You need to consult with her over the redundancy before you make a final decision about it - explain what the issues are and why she is the one selected for redundancy. if she is one of several staff who do similar work you may have to follow a fair selection process to ensure tat the right person is redundant. It is not as simple as saying she worked on client X business and client X has terminated their contract.

Once you have explained the situation, told her her rights to redundancy pay, and how much that is, and given her a chance to come up with alternatives to redundancy which you will consider carefully, you then make a decision. You notify her of the decision, give her 4 weeks' notice and explain that she is not required to attend work throughout those 4 weeks.

You run your payroll on the normal date, including her normal pay. On her final day of employment you either run her final payroll including unused holiday entitlement and redundancy pay (which is not subject to tax or NI) or you do that on your next normal payday. Either way you should tell her what to expect and when.

 

[Freelancer87]

That seems like a great outline....

Being that they are the only employee (and we are trying to save our business), the selection process is pretty easy.

Sales and enquiries are down, loss of major contact and increase in expenses have all led to this (that and we are staring at a huge corp tax bill towards the end of the year).

Do we seem like we are on solid ground?

Your input has been invaluable with this. Thanks!

 

[Newchodge]

If they are the only employee then you should be pretty safe.

Shout if you have concerns at any stage.

 

[Freelancer87]

Hello Cyndy,

I called ACAS today and asked for some guidance but it just got a bit more confusing.

Being that we have a good business case to make our employee redundant (lack of business, increased cost of doing business, we have already made cuts in overheads and a looming tax bill to pay in a few months), when looking at any scenario I can come up with such as reduced hours, remote working, etc....if they can't come up with any ideas about not being made redundant, can I meet to discuss the meeting in the morning, then make the redundancy the same day?

What about 'suggesting' voluntary redundancy? If I tell her this is the situation, would you mind volunteering for redundancy...would that be okay? I don't want to duck my responsibility of what is due to her. Would voluntary redundancy change her pay at all?

My BIG concern is while we are in this 'consultancy' phase, they go and steal our database of clients.

#stressed

Thanks for the input

 

[Newchodge]

You can certainly hold the consultation meeting, offer them the chance to go home immediately, as they are likely to be upset, then hold the final meeting the next morning, or even half an hour later. You can ask them not to use the computer at all.

Voluntary redundancy makes not the slightest difference, except for making the employee's life difficult if they have insurance against redundancy.

 

[Freelancer87]

You've been a great help....thanks for the insight

What if we have the consultation, then they go off sick (or even long term sick). Does that stop anything from our perspective?

(Voluntary redundancy will not be discussed....but the answer was useful)

 

[Newchodge]

If they go off sick after you have given them notice, it makes no difference. If they don't come to the notice meeting because they are off sick you may need to think about what you want to do, but cross that bridge if it happens.

 

[Freelancer87]

The plot thickens....I spoke today about lack of sales and the possibility that they would be made redundant.

She then gave me her keys and walked out. I contacted her and asked her if she just quit and she said no. I then told her she was expected to be at work tomorrow so we can discuss this. The response neither confirmed or denied she would attend.

I wonder where to go from here? I suspect I would need to formally invite to a redundancy meeting as today's meeting was a bit informal and unannounced and it also covered many topics.

If they no-show tomorrow, what next? At what point can I hold the redundancy meeting without her in attendance? Surely the action they took does not stop everything is their tracks.

I'm not sure :/

 

[Jeff FV]

Please, have some sympathy with your employee who you are making redundant. Whilst I appreciate you may have no option in taking this route, but do not under estimate the shattering effect it will have on your employee.

 

[Freelancer87]

Point taken Jeff....I have been on the other end so I can appreciate the 'other side' of things

 

[Freelancer87]

How do you calculate the final day of employment? Is the last day of her notice period (for example four weeks) even if we don't require them to be at work?

At what point do we pay the normal wage, redundancy pay and unused holiday pay? If we make the redundancy on the 28th of this month, do we short pay them the remaining 3 days left in July?

I'm a bit confused with that end of things. :/

 

[Newchodge]

You haven't yet given them notice. You have stated you have to give them 4 weeks' notice. If you give notice today (23 July) 4 weeks takes you to 19 August. That is their final day of employment and the final date they should be paid for. In addition you have to pay redundancy pay (without tax and NI deductions) and outstanding holiday pay.

With regard to them walking out yesterday, you need to see what happens today. If they don't appear you need to contact them, ask what their position is and, if necessary give them notice over the phone and confirm it in writing.

If they say they have resigned and won't be coming back you don't legally have to pay them after yesterday, except for outstanding holiday pay, but it is up to you whether you go down that route. I personally would not recommend it.

 

[Freelancer87]

Stellar advice! I don't want to make things worse and I am mindful that this is a stressful situation.

Thanks again!

 

[BusinessDeli]

Did they come in? They clearly appear to be upset (walking out was my clue), so I'd restrict that client database in case they do or have arrived for work.

 

[Freelancer87]

Nope....two days AWOL!

 

[geester]

Can you not do something if she has not informed you of her absence? Is this not breach of contract?