Warning to employers who regularly enhance redundancy payments

By Jayne Flint

The Employment Appeal Tribunal (EAT) in Peacock Stores v Peregrine has confirmed that where an employer consistently makes enhanced redundancy payments, such action could give rise to an implied contractual entitlement.

Under the Employment Rights Act 1996, a statutory redundancy payment is calculated using an employee’s age, week’s pay (capped at the current limit of £450 but due to increase to £464 on 6 April 2014) and length of service (up to a maximum of 20 years’ service).

From 1996 to 2002, Peacock Stores made redundancy payments in excess of the statutory entitlement. In particular, it did not cap the amount of a week’s pay nor the number of years’ service to be applied. This meant that an employee with, for example, 30 years’ service was credited with 10 years’ more service than the statutory scheme allows for…

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