Share the article
twitter-iconcopy-link-iconprint-icon
share-icon
Western EuropeDecember 2 2020

Financial services redundancies loom in wake of Brexit

As the UK prepares to leave the EU single market, many banking employees face uncertainty. 
Share the article
twitter-iconcopy-link-iconprint-icon
share-icon
180105_BDBF_Rolleen_025 (1)

Many banks will be making their final decisions over the next few weeks on whether to replace their UK teams with teams based in the European Union, whether for regulatory reasons or to consolidate their operations in the EU. In turn, this may lead to a surge in redundancies in UK financial institutions.

Facing a potential redundancy can be a difficult and stressful time, particularly given the twin pressures of Brexit and the Covid-19 pandemic on the jobs market.

Do employees have a right to be offered a relocation package?

There is usually no requirement for employers who are relocating their services abroad to offer a relocation package to affected staff. If an employer has a reduced need for employees in the business, it can make the roles redundant.

It is possible that an international intra-group transfer may be caught by TUPE legislation (although not all international transfers will be, and each situation will require careful analysis). If there is a TUPE transfer, employees have the right to remain employed after the transfer on the same terms and conditions. However, this includes terms as to place of work and, in most cases, that will be limited to a place of work in the UK. If staff are not required in the UK, then the affected employees are likely to be made redundant.

Employees who have been seconded from overseas to work in the UK may be entitled to have their relocation expenses paid at the end of their secondment period. This will depend on the terms of their secondment agreement and there is no default entitlement to relocation expenses under English law.

It is possible that redundant employees may be offered suitable roles abroad as an alternative to being made redundant but there may well be other obstacles to taking up those roles internationally, that make that either undesirable or impractical.

What happens to employees on a tier 2 visa?

The options for employees on a tier 2 sponsorship visa can be very limited in a redundancy situation. Unless those individuals have some other grounds on which to remain in the UK, their visa can be curtailed as quickly as 60 days from the date of the termination of employment. Employees may have uprooted their life to move to the UK to take a job and could be left having to leave the country with very little notice.

These employees are particularly affected where their employer chooses to make a payment in lieu of notice because this brings about the end of the visa more quickly in comparison to working notice or remaining on garden leave. How notice is exercised in these situations should be given careful and early consideration. Similarly, employees on tier 2 visas facing redundancy may wish to look in earnest for alternative roles available internally and perhaps cast the net wider than they would otherwise be inclined to.

What financial entitlements to redundant employees have?

The financial entitlements of employees who are made redundant will largely depend on their contractual and statutory rights.

An employee’s basic entitlements on redundancy are not generous. An employee lawfully dismissed for redundancy is entitled to be paid:

  • their notice or a payment in lieu of it (if their employment contract allows that);
  • a statutory redundancy payment capped at £538 or £807 per year of service (depending on age); and
  • a payment in lieu of any accrued but untaken holiday entitlement.

The terms of employment contracts dealing with bonuses are typically unfavourable in a redundancy situation. Most employment contracts will contain language that purports to deprive employees of a bonus if they are under notice or not employed on the payment date. Considering that bonuses for the calendar year are usually paid in March the following year, that could prove costly for many employees who are made redundant around December or January. Whilst that may sound unfair, if the contract is properly drafted, then legal arguments against such clauses are usually quite difficult. However, the drafting of the contract will need to be properly reviewed in each case. In many cases, this may be academic, given the overall impact of the Covid-19 pandemic on financial institutions, which may result in many banks either not paying bonuses at all or only paying modest bonuses.

The position can often be better, however, for those who have deferred remuneration. Deferred remuneration entitlements are based entirely on the employer’s plan rules, which can vary quite considerably. Many employers will allow for those who are made redundant to be considered ‘good leavers’ and retain a higher proportion of their deferred compensation than employees who leave to go to a competitor, for example. But not all employers will treat those who are made redundant as good leavers and the employer’s plan rules will need to be considered carefully.

Do employers have to offer a redundancy package?

Many employers will offer a more generous discretionary or, more rarely, contractual redundancy policy. Typically, such policies will offer a package based on a multiple of complete years of service. Most redundancy packages are offered as a quid pro quo for waiving employment claims under a settlement agreement. However, employers are not required to offer enhanced redundancy packages at all.

How do employees negotiate the best exit package?

Employees looking to get the best deal for their exit package need to take expert advice at the earliest opportunity. Lawyers are often approached towards the end of a redundancy consultation process, and sometimes after the dismissal has taken place, which can make it more difficult to maximise any legal leverage.

In many cases, employees can try to use goodwill to negotiate elements of their package, but if there is none, or it has reached its limit, then employees need to obtain advice to understand what legal claims they may have against the organisation (if any) and offer to settle those claims in return for enhanced exit terms.

Rolleen McDonnell is a senior associate at employment law firm Brahams Dutt Badrick French.

Was this article helpful?

Thank you for your feedback!

Read more about:  Regulations , Western Europe , UK