Q&As

Is a protective award, made by an employment tribunal following an employer's failure to carry out collective redundancy consultation, subject to tax?

read titleRead full title
Last updated on 01/06/2017

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

  • Is a protective award, made by an employment tribunal following an employer's failure to carry out collective redundancy consultation, subject to tax?

Is a protective award, made by an employment tribunal following an employer's failure to carry out collective redundancy consultation, subject to tax?

Where, in the context of a collective redundancy exercise, an employer failed to comply with the requirements (under sections 188 and 188A of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULR(C)A 1992)) for statutory consultation, the employment tribunal may make a 'protective award' as a remedy for that failure.

Such a protective award is treated as ‘arrears of pay’ for the purposes of Part XII of the Employment Rights Act 1996, with the result that an employee whose employer becomes insolvent can apply to the Secretary of State for it to be paid out of the National Insurance Fund.

For further information, see our Practice Notes:

  1. Protective awards

  2. Redundancy—Insolvency and the state guarantee fund

Any payment made on termination may be taxable in full, in part or, in limited circumstances, may be fully exempt.

In order to determine the extent to which a payment is taxable, the first question to be answered is whether the payment made (or other benefit provided) on or in connection with termination of an employment is taxable as 'earnings' within section 62 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003). 'Earnings', for these purposes means:

  1. any 'salary, wages or fee'

  2. any 'gratuity or profit or incidental benefit of

Related documents:
Key definition:
Protective award definition
What does Protective award mean?

An award of compensation made by an Employment Tribunal.

Popular documents