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Settlement Agreement

Discussion in 'Workplace dilemmas' started by brookydancing, Jun 11, 2019.

  1. brookydancing

    brookydancing New commenter

    SA negotiations are under way, re leaving after long term sickness (depression/WRS), end date should be 30th June but school being slow to respond and I feel now in position to move on. I am scheduled to go on half pay at end June, will this still happen if negotiations are in progress. Also, getting confused about whether pension, student loan, tax, NI, will be deducted from settlement. I know it`s not about the money, but do need to budget mortgage, bills etc. Any advice really welcome.
  2. 50sman

    50sman Lead commenter

    SAs can be tax free - speak to your union. If it does go on past 30th June you will go onto half pay if you were meant to anyway but this should not affect final SA sum

    I would have thought school would want quick end as if you are employed after 30th June that is another Staley with NI and pension contributions they have to pay.
    agathamorse likes this.
  3. 50sman

    50sman Lead commenter

    Should say salary not staley
    agathamorse likes this.
  4. grumpydogwoman

    grumpydogwoman Star commenter

    If negotiations are not complete then you'll have to go to half-pay.

    If you hoped to finish end of June but be paid until the end of August? That would count as POIL. Payment in lieu of notice. Then you'd pay tax.
    agathamorse and Lara mfl 05 like this.
  5. UpperPayShelf

    UpperPayShelf New commenter

    Sorry you've been poorly Brooky. I'm currently off with WRS and feel for you. I don't have the experience to advise but there are excellent folks here who have come out the other side with sound insight. Thinking of you and wishing you all the best. X
    Lara mfl 05 likes this.
  6. Rott Weiler

    Rott Weiler Star commenter Forum guide

    You must get advice from your union. Do not rely on advice given on here. The taxation position with SA payments is complex and depends on your individual circumstances.

    The law changed in April 2018 and now, in general, all 'Payment in Lieu of Notice' [PILON] payments are subject to tax and NI exactly the same as if you had been paid them monthly for the rest of your notice period. I would think pension contributions and student loan are also payable, but I've never asked that.


    If part of the SA payment is for redundancy up to £30,000 could be free of tax and NI. But it has to be genuine redundancy, employers can't dress something up as redundancy to avoid tax if it isn't really redundancy.

    If the settlement amount isn't for redundancy but is more than the pay you would have received if you had worked the notice period the first £30k of the balance over PILON might also be free of tax and NI. There is a complicated statutory calculation, hence the importance of you getting professional advice.
  7. kega123

    kega123 New commenter

    Agree with above advice re Settlement amounts being treated as PILON. I ended up getting the best part of 2 grand less than my agreed payment due to this. HMRC said all was correct because of the category the school processed the payment as. My union didn’t seem to be up to speed with last years change in the law and initially assured me it would all be tax free. I also received the payments in 2 monthly payments like my usual salary, with a final one-off payment which was nowhere near enough to get me through the month after rent/bills. Not quite the deal I thought I was getting. Get your union to check the amount in light of the new changes in the law!
    agathamorse likes this.
  8. Piranha

    Piranha Star commenter

    I am not sure how PILON would work with sick pay, but I suspect it would count the same as normal pay as it is a contractual entitlement. If you were working under Burgundy Book conditions and you were dismissed on health grounds on 30th June, you would be entitled to full pay from then until 31st December. That might help with negotiations. This would change to 31 August if the school has already given you notice, but then you would never drop to half pay.

    By the way, I don't think it has to be redundancy to get a settlement free of tax and NI. Any pay beyond the contractual end date would be counted as compensation and then be free of tax up to £30,000. The key point is that it is something that is negotiated, not something you would be entitled to under your contract. In teaching, the contract notice periods can be very long. If someone were to lave now, it would be over six months pay, so a settlement of no more than this could all be seen as PILON.
  9. ridleyrumpus

    ridleyrumpus Star commenter

  10. Rott Weiler

    Rott Weiler Star commenter Forum guide

    It's a site advising employers, but even so I don't understand your comment. Bringing SAs forward to complete prior to April 2018 would have been mainly for the employee's benefit wouldn't it? So they got their PILON settlement tax free (in some circumstances)?
    starlightexpress likes this.

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