GUEST COMMENT: What to expect from a redundancy package

I wrote last year about the winners and losers from the redundancies sweeping the City. At that stage, the biggest winners were the fortunate few who had guaranteed bonuses which banks had to honour in the redundancy payout. One year on, those with guaranteed bonuses are now virtually non-existent.

For the rest, the news is broadly the same- the longer you've been employed, the more generous banks are tending to be. If you've been employed for five years or more, the average severance package is around 6 months' of equivalent salary. However, this is far less if you only have 1-2 years of employment.

I stress that this is only an average. Some banks are more generous than others and it is still possible to receive a discretionary enhanced redundancy that takes your settlement to nine months or more, even where you do not have a long period of service.

Many banks have a formula for redundancy payments. This typically dictates that they pay one month of salary for every year worked, but some will only pay 2 weeks for every year worked. This is still far in excess of the statutory redundancy payment that you might otherwise receive, especially bearing in mind that unless you have worked two full years, you are not entitled to statutory redundancy in the first place.

There has been a rush by the banks over the last few months to bring redundancies forward before the bonuses are announced. This has become common practice over the last few years as most banks can avoid being contractually bound to make bonus payments if you are no employed as at the bonus payment date. There is little you can do about this, but it is nevertheless wise to check your contract to see if the banks have protected themselves in this way or not.

Some banks will go the distance to recognise, and help alleviate, the financial hardship caused by the redundancy. Others will contribute towards the cost of relocation for the departing employee and provide an extension of private healthcare or extend the use of a company car. Others are honouring the cost of training courses where these have been booked but not yet attended. But don't expect to see such latitude without having to ask for it!

You are likely to receive a compromise agreement on your exit with the bank, which has the effect of prohibiting any future claim against them. You will need to see a solicitor to advise you on the agreement and the banks will usually contribute towards the cost of your legal advice. Again, some banks are more generous than others when it comes to this contribution of fees. The sum of 500 plus VAT is considered to be an acceptable amount, and helps your solicitor properly assess if there is reason to challenge the redundancy.

Feel free to contact Philip on pl@lzwlaw.co.uk or 020 7357 9494 for a free consultation on this or any other employment law issue.