L W writes: I have to make a couple of employees redundant. One is entitled
to seven weeks’ notice and keeps asking for time off to attend interviews
for other jobs. I have let him have three days off with full pay. I still
have work that he needs to finish and I am worried he won’t work the rest of
his notice if he gets another job. Do I have to let him take time off? If
so, do I have to pay him for it? We have no contractual provisions on
redundancy.
An employee who is given notice of dismissal due to redundancy may be entitled
to time off to look for other work or training, writes Peter Done, managing
director of Peninsula. If the employee has at least two years of continuous
employment when that notice expires, he has a statutory right to
“reasonable” time off to look for another job.
An employee who is permitted to take such time off is entitled to be paid at
an hourly rate. If an employer refuses to let an employee take reasonable
time off, the employee is entitled to be paid an amount equal to the pay he
would have obtained if he had been permitted to take the time off.
An employee could go to a tribunal and complain that his employer has
unreasonably refused to give him time off, or failed to pay the amount to
which he was entitled.
If the complaint is upheld, a tribunal will order the employer to pay the
worker. The maximum amount that a tribunal can order to be paid is limited
to 40% of a week’s pay. As you have allowed your employee three days’ leave
on full pay, you have already exceeded this. Consequently no further payment
would be ordered in your case.
Many employers allow unlimited paid time off in these circumstances, but you
can tell your employee that any further time off will be unpaid. Whether a
tribunal would regard a refusal to grant any more time off as unreasonable
would depend on the circumstances of the case.
Prizes for suggestions can escape tax
M M writes: I am planning to ask my employees for suggestions on ways of
improving the business. I will offer a bottle of wine or something of
equivalent value for the best idea. Will the winning employee, or the
company, have to pay tax on the prize?
In general, an award made by an employer to an employee under the terms of a
staff suggestion scheme is taxable, writes Jon Sutcliffe, partner at
Kingston Smith LLP. However, there is an exemption. The conditions that must
be satisfied to qualify for exemption are:
- The scheme must be open on the same terms to all the employees, or a
particular group of them
- The suggestion must relate to the activities of the employer
- The suggestion must be made by an employee who could not have been expected
to make it in the course of his normal work
- The suggestion was not made at a meeting held for the purpose of proposing
suggestions
If all the conditions are satisfied, the award will be tax-free up to the
permitted maximum for the award. If an award satisfies the conditions but
exceeds the maximum, only the excess will be taxed.
The permitted maximum depends on whether it is a “financial benefit award”. A
financial benefit award is an award for suggesting an improvement in
efficiency that the employer has decided to adopt and which will result in a
financial benefit. For this, the maximum for a financial benefit award is
the greater of: half the financial benefit that the employer expects will
result from the suggestion in the first year after its adoption, or one
tenth of the financial benefit expected to result in the first five years.
In either case, there is an over-riding maximum of £5,000.
Up to £25 can be paid for an encouragement award (an award other than a
financial benefit award) made for a suggestion that has merit or shows
special effort.
There is more detailed guidance on what happens when the same suggestion is
made by more than one person and several suggestions are made by one person.
Kingston Smith LLP, the chartered accountant, and Peninsula, the
employment-law firm, can advise owner- managers on their problems.
Send questions to The Business Doctor, The Sunday Times, 1 Pennington Street,
London E98 1ST, or fax to 020 7782 5765. Advice is given without legal
responsibility.
