Overview

A recent decision is good news for employers operating contractual redundancy payment schemes, but the position may change in the future.

The Employment Appeal Tribunal (EAT) has confirmed that it was not age discrimination to apply a cap on payments under a contractual redundancy scheme to prevent workers nearing retirement receiving a ‘windfall’.

In this case, the employer operated a scheme under which payments were made to employees who took voluntary redundancy. The scheme was agreed with the recognised trade unions and payments were calculated on a formula of 3½ weeks’ pay for each year of service.

However, the scheme contained a cap that had the effect of limiting the maximum payment under the scheme to the amount the employee would have earned at their current rate of pay if they had remained in employment until the company’s normal retirement age of 65.

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