Some employers have a policy of always paying employees who are made redundant an enhanced rate of redundancy pay. The amount varies, but in some cases can be substantial. Where employers have a policy of making enhanced redundancy payments, these are normally well documented.
In the recent case of Peacock Stores v Pereguine  the Employment Appeal Tribunal (EAT) had to consider whether an enhanced redundancy payment had become contractual by custom and practice.
Peacock Stores had routinely paid redundancy pay to staff in accordance with the statutory redundancy scheme, except they did not apply the statutory caps relating to length of service and the amount of weekly pay (currently 20 years’ service and £450 respectively (£464 from 6 April 2014)).
The EAT said that the burden of proof fell on the employee to show that there was a contractual entitlement to the uncapped payments, and this was a question of fact for the Employment Tribunal to determine. In this case, the former head of HR at the employer gave evidence that calculation of redundancy payment in the above manner was “most definitely custom and practice”. This evidence was accepted by the Employment Tribunal.
Once the position had been reached, it gave rise to a contractual right for Mr Pereguine to receive an uncapped redundancy payment.
It is certainly not always going to be the case that, just because an employer has in the past made enhanced redundancy payments, there will be an implied right that it must do so in the future. In the Peacock Stores case the evidence from the former HR manager was very strong, and this will not normally be the case.
Do you need advice about redundancy payments to employees? We can help! Please contact any member of the Pure Employment Law team (01243 836840 or [email protected]).