Severance payments to employees on termination of their employment can arise in a variety of situations. For example:

  • As damages for wrongful dismissal (that is, the employer’s failure to give sufficient notice of termination)
  • As a redundancy payment
  • As compensation for alleged unfair dismissal or for unlawful discrimination
  • As a purely ex gratia payment
  • As a payment out of, or into, a pension scheme

Both income tax and National Insurance contributions (“NICs”) must be considered. Employers are liable to pay employer’s NICs on payments which constitute earnings from employment and this can add significantly to the costs of settlement.

If you are looking to put a termination package in place for an employee MS Rubric can help by drafting the agreement and negotiating, where necessary, with the employee that is leaving. Our skilled solicitors will offer pragmatic advice to ensure that any dispute is resolved as swiftly as possible.


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