My client is having her hours reduced from 36 hours to 25 but will recieve some payments to compensate In one option available she will have her hours reduced but be paid a 'redundancy payment' as a lump sum over 24 motnhs or a 'compensation payment' as a lump sum or over 12 months. It seems from this that the plan is to make her redundant then immeidiately re-engage her. How would these payments effect HB/CTB?

I logged in earlier and saw this one which has been bugging me ever since. I think what is worrying me is less the HB law but the employment law issues around what is actually going on. It may be a variation of her contract with periodical payments to ensure that she doesn't treat the variation as grounds to claim constructive dismissal. Or it may as you suggest be something analogous to a redundancy payment - something like being put on short-time working.

Anyway, the basic principle in Reg 35 of the HB regs is that a payment derived from employment is treated as being employed earner's earnings. I think it could be taxable and anything that is taxable tends to be earnings. The rule certainly applies to a compensation payments, which is what the first interpretation of the payments amounts to: and that is even though at this sort of level a lump sum compensation payment would not be taxable.

There is a specific disregard however for any redundancy payment payable in instalments. But I have never come across a case of soemone getting a redundancy payment when they have taken up alternative employment with the dismissing employer. It's a long time since I was an employment lawyer and things change: but it always used to be the case that if you accepted another job with the same employer before your notice ran out, you lost your right to a redundancy payment - which is not compensating you for the same things as the damages for loss of employment.

The answer I think is probably that it doesn't matter what you call the payments, they will be part of her income for HB purposes and of course she will lose any additional benefit from working over 30 hours. I think if it was me I'd want some good employment law advice to try to work out exactly what the law might assume to be happening here, but I wouldn't be very optimistic that the redundancy payment rules would apply.

it struck me that what you were saying was that she was continuing doing the same job, in which case there is no redundancy at all (properly so called) and your client might be well advised to consult an employment lawyer .....

for there to be a redundancy, i seem to recall, htere has to be a genuine redundancy (i.e., the job goes, period).

the whole situation left a bit of a bad taste in my mouth when i read it.....

Wed 02-May-07 09:28 AM by SLloyd

I agree it smells a bit iffy but from another perspective the employer, whoever that is, could have a genuine need to change working practices and is offering a potentially valuable sweetner for an agreed change of contract terms. This might be a package taht will save the company and/or save jobs. I agree though that client should seek employment advice before agreeing to anything, there is a risk that she could be hoodwinked! The follwoing are just some things that strike me she will need to know:

What sort of work is it? What is the market like for this field of work?
Does she have a written contract? Does it have a variation clause?
How long has she worked for this employer? How old is she?
How many people work for same employer, how many of those doing the same job? How many part time? ratio of men to women? How old are the other employees?
How do the "compensation" payments stack up against the lost salary?
Is she in a union?
Has there been a consulation?
Is she in a field of work where it would be possible in the mid to long term to suplement her income with another part time job?
Are there any restrictive covenants in her contratc preventing her from working for other employers?
Are ther other terms in her contract which might be open to negotiation in her favour? Hours, rates, place of work, breaks, childcare, training?
Once the compensation payments come to an end, what is the long term effect on benefits?

It is a public sector employer and she is in a union which has negotiated this - possibly as a means of avoiding 'real' redundancies. In many ways it seems quite good: for 2 years she gets the pay she would get for 36 hours but only have to do 25 but obviously from a benefit point of view 25 is a bad number of hours to work. How would a lump sum paid for 24 months on one day be worked into a figure for average earnings?