News & Insights

Cap on redundancy pay

Where employees bring contractual redundancy claims, does their statutory redundancy entitlement count towards the cap on breach of contract claims?

The Employment Tribunals’ jurisdiction to hear contractual claims is subject to a cap, currently £25,000, on the value of the award in those claims.  In Ugradar V Lancashire Care NHS Foundation Trust (the Trust), the Employment Appeal Tribunal (EAT) was asked to determine whether Mrs Ugrador was entitled to a statutory redundancy payment on top of her contractual redundancy entitlement in circumstances where this had been capped at £25,000.

By way of background, Mrs Ugrador’s position within the Trust ceased to exist following a re-organisation.  During the redundancy consultation process, Mrs Ugrador was offered various alternative roles which she did not accept.  When her employment terminated, the Trust declined to pay a redundancy payment, alleging she was not entitled to this on the basis she had refused suitable alternative employment.

At first instance, the Employment Tribunal (ET) determined that Mrs Ugrador was entitled to a contractual redundancy payment of £43,934.04 under the terms of the Trust’s contractual scheme, which provided for any statutory entitlement (in this case £5,868.00) to be set off against any contractual entitlement.  The ET found that the Claimant was entitled to the contractual redundancy payment, capped at £25,000, but declined to order a separate statutory redundancy payment.

The EAT upheld the Claimant’s appeal against this decision; whilst the Respondent was entitled to set off the statutory redundancy payment against the contractual redundancy payment this set off should be against the original sum of £43,934.04, not the capped award of £25,000, and she was entitled to be paid a statutory redundancy payment in addition to this.  The EAT also held that had the Trust’s contractual claim tried to restrict Mrs Ugrador’s rights to a statutory redundancy payment this would have been void in any event.

The EAT went on to comment that the level of the statutory cap, which has remained unchanged for 25 years, is outdated and noted this could be increased relatively easily by the passing of a new statutory instrument.  Watch this space…