Redundancy pay

In a redundancy situation, an employee might be entitled to both statutory and contractual redundancy pay. Statutory redundancy payments are calculated using age, length of service and weekly pay (currently capped at £525). Contractual payments can be more generous. What happens when a contractual sum isn’t paid, and the employee brings a breach of contract claim to recover it? Does the statutory redundancy element form part of the £25,000 cap for a breach of contract claim in the employment tribunal?

In Uradar v Lancashire Care NHS Foundation Trust, the employee’s contractual redundancy pay was about £44,000, including the statutory element of around £6000. The employee was dismissed but the employer said he had refused suitable alternative employment so refused to pay the redundancy pay. The employee brought a tribunal claim and won. The tribunal said the statutory redundancy element was part of the breach of contract claim and awarded him £25,000 (the maximum allowed), rather than £25,000 plus £6000 for the statutory redundancy pay. The employee appealed.

The EAT agreed that the tribunal had got it wrong. The employee had two separate claims: one for statutory redundancy pay and one for breach of contract. He should have been awarded both sums.

This is a logical decision. More concerning to employers is the EAT’s criticism about the statutory cap of £25,000. As in this case, the cap often prevents full recovery of breach of contract sums in the employment tribunal. The EAT noted the potential injustice and said that the current cap had been in place since 1994. They queried whether it should be raised.  Although higher value breach of contract claims can be brought in the civil courts, tribunals are attractive to employees because they are faster and there are no fees.