The Redundancy Payments Service (‘RPS’) have advised that claims for Compensatory Notice Pay (‘CNP’) for those with weekly salaries in excess of the weekly limit payable by RPS of £525 (previously £508) are now being calculated differently.
This change came in the effect on 6 April 2019.
Whereas previously the statutory and notional deductions were subtracted before the weekly limit was applied by RPS, they are now be subtracted after the weekly limit has been applied.
An example of how this change can affect a claim for Compensatory Notice Pay can be seen below:
Previous Calculation – Pre 6 April 2019:
A former employee of a limited company who is entitled to the maximum of 12 weeks’ notice pay for their 12+ years of service with the company. Their weekly salary was £769.
Employee’s Gross CNP entitlement: £9,228.00
Minus benefits the Employee may have been entitled to – £803.88
Minus notional tax – £1,684.80
Net entitlement = £6,739.32
Amount due for loss of notice after limit of £508 was applied = £6,096.00
New Calculation – Post 6 April 2019:
Employee’s Gross entitlement: £9,228.00
Employee’s entitlement after limit of £525 was applied £6,300.00
Minus benefits the Employee may have been entitled to but did not claim – £803.88
Minus notional tax – £1,099.22
Net entitlement = £4,396.90
Amount due for loss of notice = £4,396.90
Conclusion
So despite the weekly limit increasing by 3%, the employee in this example is worse off by a massive 28%.
Further information can be obtained by contacting RPS directly.
Kind Regards
CFS Redundancy Payments Ltd