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Rushing redundancies and pension costs

A recent Employment Appeal Tribunal (EAT) case has highlighted the perils of rushing through a redundancy process in order to avoid the additional contributions (about £80,000 in this case) payable when an employee in the Local Government Pension Scheme is about to qualify for early release of pension on redundancy.

In the case of Cook v Gentoo Group, the tribunal found that the dismissal was unfair but not discriminatory on the grounds of age. The EAT overturned the decision on discrimination and asked the tribunal to reconsider.

One of the lessons learned from this case is that it isn't possible to justify discrimination on the basis that not discriminating will be more expensive. Cost can be a factor but there must be something additional. Care will be needed to avoid successful claims in these sorts of situations and also to prevent the sort of damage to staff morale that can arise from denying longstanding employees the benefits that they would otherwise be entitled to on redundancy.

For more information, see our detailed ebriefing on this case.

A generous redundancy and notice package cannot offset or replace early retirement rights in the LGPS or the associated costs of these rights. These costs must form part of any business plan to exit employees who are at or nearing the age where the right to early access to pension is reached.


lgps, employment, pensions, charities, education, local government, housing