Q&As

If an employer terminates an employee's contract by giving pay in lieu of notice and asks him to return his company car, how should the pay in lieu be calculated for the loss of the car for his notice period?

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Published on LexisPSL on 08/09/2016

The following Employment Q&A provides comprehensive and up to date legal information covering:

  • If an employer terminates an employee's contract by giving pay in lieu of notice and asks him to return his company car, how should the pay in lieu be calculated for the loss of the car for his notice period?

If an employer terminates an employee's contract by giving pay in lieu of notice and asks him to return his company car, how should the pay in lieu be calculated for the loss of the car for his notice period?

In this situation the employer should ensure that the employee receives the same amount that he would receive if he were to bring a claim for damages for breach of contract. Those damages would equate to the value of the loss that he would suffer.

In a claim for breach of contract, the valuation of the benefit of a company car will depend upon the contractual entitlement which the employee had before he was dismissed:

  1. if he was entitled to a company car for work purposes only, he would not be entitled to any damages as he would suffer no loss, whereas

  2. if the employee was entitled to use the car for personal as well as work purposes, he will be entitled to damages to reflect the loss of the personal use of that car.

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