Howard Lewis-Nunn and Jackie Thomas answers some of your legal questions
Q We have agreed a severance package with an employee, part of which
includes a payment in lieu of him serving out his notice. Do we have to deduct
tax from this payment or can it be made to him gross?
A This sum will depend on the employee’s contract. If you are
entitled to dismiss him immediately and pay him in lieu of notice, the payment
is classed as an "emolument" and is subject to Income Tax under
Schedule E. If his contract makes no such provision, termination in this way is
technically a breach of contract and any payment is treated as compensation for
the breach. This means up to £30,000 can be paid tax-free. The employee is only
entitled to net salary, although it is common practice for employers to pay
gross as part of a severance package.
Q One of the candidates we rejected following a job interview has asked
for copies of the interview notes and assessments. Do we have to provide them?
A Under the Data Protection Act 1998, if a living individual can be
identified from a document then (subject to some exemptions) they have the
right of access to it. The Information Commissioner in the proposed code of
practice on employment and the Data Protection Act has confirmed this should
include interview records, including any handwritten comments.
You are not obliged to do anything until a request in writing is received by
the individual. Disclosure can be declined if the documents identify another
individual, unless they have consented or it is reasonable to comply. There are
limited grounds for refusing disclosure.
Q We are looking at ways of restructuring the remuneration packages for
our employees. One proposal under consideration involves making changes to
current benefits. Is there any reason why we cannot do this?
A It will depend on whether the employees are contractually entitled
to receive these benefits. If they are not part of their contractual terms or
you have a contractual right to vary the benefits, you can make changes to
However, if the benefits do form part of their contracts, you will need to
obtain the employees’ consent to the changes.
If they do not consent and you still want to make the changes, you have two
options. You can terminate their contracts, or offer new ones with the amended
benefits, in which case the employees would have a potential claim for unfair
dismissal if they have one year’s service.
Alternatively, you can make the changes unilaterally, in which case the
employees can either accept them, continue to work but refuse to accept the
changes, in which case they may have claims for breach of contract; or
alternatively they could resign and claim constructive (unfair) dismissal. In
practice, both the likelihood of the employees accepting the changes, and the
potential compensation in any unfair dismissal claim, will depend on the exact
nature of the changes you wish to make.
Howard Lewis-Nunn and Jackie Thomas are members of the employment team at
Berwin Leighton Paisner