Redundancy payments: what to expect

It's that time of year. There are going to be redundancies at BofA Merrill Lynch. There have been redundancies at Credit Suisse, BarCap and JPMorgan (commodities).

Fortunately, banks are quite generous when it comes to redundancy payoffs.

The norm, according to employment lawyers, is one month's pay for each year of service. 'Pay' is usually deemed to be salary, which means redundancy payoffs have benefitted from front office salary hikes.

You'll be lucky to get anything in the way of bonus, but you will usually get to walk away with any bonuses that have been deferred, which could be fairly lucrative nowadays.

Equally, you'll usually get paid for your notice period (which you probably won't have to work). This could be three months, but may be six months. You'll also get paid for any holiday you've accrued until the termination date and might get a contribution towards outplacement services (paid directly to the provider). Up to 30k, it's all tax free.

"If you hold a senior position and are a high performer, the payment will typically be more generous," says employment lawyer Ronnie Fox.

Philip Landau, an employment lawyer and partner at Landau Zeffertt Weir Solicitors says that, in theory, it's possible for banks to dismiss you without paying anything if you worked there for less than two years.

"In order for statutory redundancy payments to kick in, you need to be employed for two years with that employer," he says. "If you are employed for anything less, an employer could potentially get rid of you and pay nothing.

"However, if there's a custom and practice of paying off all redundant staff, and paying them at an enhanced level, a bank will be obliged to pay each individual according to that custom."