Redundancy payments – custom and practice

In the case of Peacock Stores v Peregrine & ors UKEAT/0315/13/SM, the Employment Appeal Tribunal confirmed that where an employer consistently makes enhanced redundancy payments such action could give rise to an implied contractual entitlement.

The EAT reviewed how a company had made redundancy payments over a protracted period. From the 1980s and 2002, Peacock Stores made redundancy payments in excess of the statutory entitlement. In particular, it did not cap the amount of a week’s pay nor the number of years’ service to be applied.  The finding was that there was custom and practice which had established that the redundancy payments were enhanced beyond the statutory redundancy amounts.

From 2002 and 2006, the approach taken by the company with regard to redundancy payments was less clear and more sporadic. However, it was recognised that there was a lack of evidence to suggest that the established custom and practice had changed.

The EAT upheld the Tribunal’s decision and found that Peacock Stores’ decision to enhance redundancy payments had been followed without exception for a considerable period of time and therefore had, by virtue of custom and practice, established a contractual term to the effect that enhanced redundancy payments would always be made.

The clear message from this case is that where enhanced redundancy payments have consistently been paid out using the same terms for several years, this is likely to create an implied contractual entitlement for future employees to also receive the same enhanced terms. Where such enhanced terms are consistently paid and an implied terms has been established, it will be difficult to successfully argue that the redundancy payments are genuinely discretionary.

We regularly advise both employees and employers on redundancy payment issues. Our employment lawyers based in Canary Wharf, London have successfully secured enhanced redundancy terms for senior individuals on the termination of their employment. We have also successfully defended claims on behalf of employers and company clients can avoid liability for enhanced discretionary payments if they vary the method in which enhanced terms are calculated.  If you would like to discuss a redundancy situation at work, then please contact us today for a confidential discussion on 0207 956 8699 or email