The cupro-nickel handshake

18th November 1994 at 00:00
Philip Lott explores the options for those facing redundancy. Golden handshakes are big news. Handsome payments are made to departing bosses in nationalised industries. Huddersfield University recently provoked a furore by proposing a termination package of some Pounds 400,000 to its vice-chancellor, which it later withdrew. But what can teachers expect when facing redundancy? Sadly, their handshakes are distinctly cupro-nickel.

Entitlement to redundancy pay: All staff working for two full years with an employer are entitled to a redundancy payment. Formerly, part-timers working between 8 and 16 hours per week had to be employed for a full five years to gain this right. However, since the celebrated House of Lords judgment of March 1994 it now seems clear that all part-time staff have the same rights as full-timers, irrespective of the hours they work.

Continuous employment: For those in the maintained sector there is an important refinement. For redundancy purposes, all unbroken service in maintained schools and colleges is counted as continuous. Hence redundancy payments here are calculated on total length of service, whether in LEAs, grant-maintained schools, or FE colleges. However, this has consequences for those made redundant but who gain other jobs. If offered a postin maintained education before their current contract finishes, and if starting the new employment within four weeks of leaving, they lose entitlement to a redundancy payment. Instead, they will carry their existing service forward (for redundancy purposes) to the new job.

Statutory redundancy payments: These are based on age, length of service and gross final salary: one week's pay for each complete year worked up to age 41, and 11Z2 weeks' pay for years between 41 and 65. A limit of 20 years is applied, so that the maximum entitlement is 30 weeks' pay. There is another restriction: the Government limits "a week's pay" to Pounds 205. The maximum statutory redundancy payment is a meagre Pounds 6,150.

Discretionary payments: Employers do have some discretion to offer more but any largesse by LEAs is constrained by the Court of Appeal decision in the 1992 North Tyneside case. Here, the district auditor established that local authorities have no power to offer severance schemes beyond the limits set down in regulations. Accordingly, maintained school employers can offer only two additional benefits to redundant teachers: first, to calculate redundancy payments on actual salaries (rather than the Pounds 205 limit) and second, to offer enhancements of pension to those eligible for early retirement. Financial stringency is starting to curtail generosity by authorities.

Unemployment benefit: Redundant employees without further work are normally entitled to claim this (if they have enough National Insurance credits). It is not means-tested, and the current rate is Pounds 45.45 per week, payable for 12 months. But it may be replaced by a "a job-seeker's allowance" lasting only six months.

Premature retirement: For teachers over 50, redundancy offers a valid reason to claim premature retirement. Under the Teachers' Superannuation Scheme (TSS), employers have considerable discretion to enhance reckonable service for pension purposes - up to 10 extra years. Again, the trend is of progressive parsimony, with northern LEAs often more generous than those in the South. But beware! What the employer giveth, the superannuation regulations taketh away . . . If a teacher receives enhancement of service beyond 6 2Z3 years - as well as a redundancy payment - the enhancement lump sum has to be cut (by 30 per cent of the redundancy payment for each added year beyond 62Z3). Furthermore, if the teacher returns to a post within the TSS, the pension may be reduced under the abatement regulations, which ensure that income from salary and pension together does not exceed their previous earnings.

Taxation: There is a limit to the amount employees can receive as termination payments before paying tax. Any lump sum received from the TSS representing accrued pension entitlements is tax-free. However, if the total of all other receipts (statutory redundancy pay, discretionary redundancy payments, ex gratia hand-outs or enhancement lump sums) exceeds Pounds 30,000, the excess over this limit is taxed at the employee's marginal rate. Most receive their termination payments tax-free. Nevertheless, for teachers there is no pot of gold at the end of the redundancy rainbow.

Philip Lott is the senior solicitor of the Association of Teachers and Lecturers.

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