This week, the UK’s Office for National Statistics (ONS) reported that redundancies rose to 370,000 in the three months to October, the most since records began in 1992.
The strain on the domestic economy caused by the worsening pandemic is forcing swathes of businesses in all sectors to cut staff.
It has been a banner year for markets and for investment banking, but as bosses at domestic and international banks sign off on budgets for 2021 – which also brings the reality of Brexit – some will be thinking of redundancies.
Staff should know their rights so they can move quickly and protect their position if put at risk.
Few Euromoney readers will be combing over details of the statutory redundancy pay to which those who have at least two years’ service are entitled. This is capped at £538 or £807 per year of service depending on age, so barely enough for one bottle of the ’96 Château Latour.
Rolleen McDonnell, senior associate at BDBF, a London-based specialist employment law firm that represents individuals in regulated sectors, including financial services, tells Euromoney: “Even if an employee’s contractual entitlements on termination are relatively modest, they may also have statutory claims in connection with their dismissal. It is worth investigating this at an early stage.”
Staff shouldn’t assume they are entitled to a bonus
In banking, of course, the biggest question for most is what happens to their bonus if their employer makes them redundant.
Whether or not employees are eligible to be paid a bonus will depend almost entirely on the terms of their employment contract or any bonus scheme, so it is important to know exactly what was agreed in writing – rather than hinted at or promised over that third glass at Sweetings.
“The vast majority of contracts will have language that purports to deprive employees of payments if they are either under notice or not employed on the date that payments are made,” McDonnell says.
“However, in the current financial climate, many discretionary bonuses may be modest or may not be paid at all.”
Staff shouldn’t assume they are entitled to a bonus, and should be au fait with their precise contractual terms and conditions before entering into redundancy discussions or negotiations with employers.
There is no obligation for employers to offer employees anything beyond their contractual entitlements and statutory redundancy pay.
If employers do offer an enhanced redundancy package, the payment will often be based on a multiple of complete years of service.
Settlement agreement
However, McDonnell explains that, where packages are offered, it is usually in return for the staff member agreeing not to pursue any claims such as for unfair dismissal.
“Employers offering enhanced packages will usually require the recipients to sign a settlement agreement, in which they agree to waive their claims against the employer in exchange for the enhanced package,” she says.
Bankers need to be careful ahead of bonus season.
McDonnell offers a reminder: “The best time to maximize an individual’s legal leverage is often at the outset of a consultation process. Goodwill can sometimes be helpful in getting enhanced terms, but that can often have its limits.”
Euromoney hopes all our readers have a good holiday break and can celebrate bonuses in the spring without being offered the dreaded virtual black bin bag for personal effects on the hard drive before being locked out of the VPN.
And if that does happen, we hope you get a big pay-off and walk straight into another job at a better employer.
