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An employment tribunal may make a protective award covering one or more employees in circumstances where the employer proposes to make 20 or more employees redundant and fails to follow the consultation rules set out in section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992.
The representative of the affected employees, i.e. an elected employee representative, trade union official or one of the employees, may make the claim. The tribunal, if it finds the claim well-founded, must make a declaration to that effect and may make a protective award. The award is made in respect of those employees about whom the employer has failed to consult, who have been dismissed as redundant or whom it is proposed to dismiss as redundant. The award will specify the number of employees involved, the number of days pay that each of them must receive, up to 90 days maximum, and the start date of the protected period.
The payment is calculated using the "week's pay" rules defined in the Employment Rights Act 1996. There is no weekly ceiling as there is in the case of statutory redundancy pay. The calculation date for cases where "a week's pay" is based on twelve weeks of earnings is the earlier of
- the date on which the protective award was made, and
- the date used to calculate the employee's redundancy pay, or that would be used if the employee were entitled to redundancy pay.
If the award period is not a whole number of weeks, the additional few days is a proportion of "a week's pay". For example, a 60-day award would be 8 weeks and 4/7ths of a week.
A protective award is punitive and, if any of the employees who are to be dismissed as redundant are still in employment during the protected period, their earnings from the employment cannot be offset against their protective award payments.
Employers required to make protective award payments must remember that, if any of the employees concerned have already receive Jobseekers' Allowance or income support during the period of the award, the amount of those benefits paid must be deducted from the protective award payments before they are paid. The employment tribunal automatically passes details of the award to Jobcentre Plus and the employer must, within 10 days of the award being made, provide the name, address and NI number of each employee entitled to an award payment and the date on which the employment ended or will end.
Jobcentre Plus then sends recoupment notices to the employer for each of the employees affected and the amount indicated on the notice must be deducted from the award payment before it is paid. If the employer fails to make the recovery, the employer becomes personally liable to pay the amount involved to Jobcentre Plus. The employer could then endeavour to recover this amount from the employee.
Because the remaining part of the protective award payment is made in respect of the termination, i.e. the redundancy, it is subject to income tax to the extent that, when combined with any other such payments, they exceed £;30,000. There is no liability for Class 1 NICs.
The standard PAYE procedures for making payments to an employee who has left should be applied, namely:
- If the P45 has been issued to a leaver, income tax must be deducted from any further standard payments using code BR. The employee should be given a letter giving details of
- the date of the payment,
- the gross amount of the payment, and
- the amount of tax deducted.
- A further P45 must never be issued; neither may the issued P45 be amended. The tax office does not need to be informed about the additional payment at the time, but the payroll record must be amended so that the correct payment and tax appear on the year-end returns.
For further information about recoupment notices, see http://www.dti.gov.uk/....html.
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