Beware of enhancing payments – they can become contractual

Peacocks stores have just had a ruling against them in respect of employees claiming enhanced redundancy payments.

In the tribunal former HR staff gave evidence that Peacocks routinely paid enhanced redundancy pay to staff as a matter of custom and practice. The particular enhancement was to use the statutory redundancy scheme formula but to disapply the cap on length of service and the amount of weekly pay ie: paying actual pay not capping it at £450.*

The Judge concluded that “there was ‘a consistently applied and well understood policy of enhanced redundancy payments’.

Once the position was reached that a contractual right to an uncapped redundancy payment was to be implied by custom and practice, a departure from that term by the employer would represent a breach of contract, the employee being entitled to the difference between the statutory redundancy payment they had received and the enhanced payment they should have reached.

If you want to avoid an enhancement becoming an implied term of the contract make sure you vary what you do on a case by case basis so there is no consistency.

* NB the cap on a week’s pay increases on 6th April to £464 from £450