Custom & Practice - Redundancy Payments

Custom & Practice - Redundancy payments - the custom and practice of an employer can insert unwritten implied terms into a contract of employment. In the recent case of Peacock Stores v Peregrine an employer routinely paid staff in accordance with the statutory redundancy scheme albeit the current cap of £450 gross pay per year of service did not apply.

The Claimant had the burden of proof to establish that there was a contractual entitlement to the uncapped payments. A former head of HR confirmed that the uncapped method of calculation was "most definitely custom and practice". The practice was consistently applied for a significant period of time. There was no evidence to the contrary. Therefore, failure to pay the uncapped payments represented a breach of contract. 

Employers should be very careful not to fall into this trap. Any redundancy policy should clearly confirm the method of calculation. This should not be deviated from unless there is good reason and it is clear that the employer is exercising its non-contractual discretion. In this scenario, a settlement agreement may be appropriate. If in doubt seek legal advice before it becomes an issue.

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