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Redundancy Payment Caps not Age Discrimination


Lawson-West Solicitors - Expert Author

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In Kraft Foods v Hastie, the Employment Tribunal had to consider whether a cap on redundancy payments was age discrimination or a proportionate means of achieving a legitimate aim.

The employer had a generous contractual redundancy payment scheme which was capped so that employees did not receive a redundancy payment in excess of their wages up until retirement, i.e. prevented employees being better off receiving redundancy pay than working until normal retirement age. The contractual redundancy payment scheme allowed employees to be paid 3½ x 8 weeks’ pay for each year of service. The employee had opted for voluntary redundancy and was entitled to a payment of just over £90,000 as he had 40 years’ service. However, the scheme had a provision that the maximum amount payable under the scheme should not exceed the amount they would have earned, at their current rate of pay, if they had remained in employment until normal retirement age. At the date of redundancy, the employee was 2¼ years from normal retirement age so his redundancy payment was reduced to just over £76,500. The employee made an age discrimination claim at an Employment Tribunal.

The Employment Tribunal found that the cap disproportionately applied to those approaching retirement age was unjustifiable and therefore was age discrimination. The employer appealed.

The Employment Appeal Tribunal held it had to consider the fairness of the contractual redundancy payment scheme as a whole and the aim of the scheme was to protect employees’ incomes after redundancy so the rule to cap payments was there to prevent giving a windfall to a redundant employee. If the scheme did not have a cap, it would result in payments that exceeded the compensation for loss of employment. Therefore the Employment Appeal Tribunal overturned the original decision and found that a cap on contractual redundancy payments was not age discrimination.

If you have a query regarding redundancy or feel you have been unfairly selected for redundancy, please contact either Ashley Hunt, Vaishali Thakerar or Carrie-Ann Randall now on 0116 212 1000 or complete one of the on-line forms on our website.

About the Author

Lawson-West specialise in commercial, business and employment law. Our team of dedicated commercial solicitors can help with buying or selling a business, business law and disputes, landlord and tenant issues and commercial property. Our expert employment team can offer practical advice and guidance on all aspects of employment law including redundancy, compromise agreements and dismissal procedures. Visit for more information.

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Article Published/Sorted/Amended on Scopulus 2010-09-11 14:04:51 in Legal Articles

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