Redundancy Vs Severence Pay

[cgs1804]

can someone explain the difference between redundancy pay and severance pay? A young friend was offered severance pay by his company and wants to know if this is treated the same as redundancy pay for income tax purposes and would he be entitle to claim jobseekers benefit right away or have to wait six weeks?

[factor-fiction]

What was the reason for dismissal? The employer will have had to give a reason. Was it given as redundancy, incapability, gross misconduct , etc?

[factor-fiction]

The JSA entitlement may depend on whether it's seen as 'voluntary redundancy' or whether it's compulsory redundancy. As you use the term 'offered' I'm wondering whether it could be voluntary.
If it was voluntary redundancy the tax treatment will be the same as for all redundancy payments- ie first £30000 will be free of tax. If he gets Pay in Lieu of Notice (PILON) that should be free of tax (and NI I think) too.

[kjn2]

http://www.askaboutmoney.com/showthread.php?t=170677

[THECORBYLOON]

With regards to JSA, this six weeks thing is non-existant. If a job ends through misconduct or because of leaving voluntarily, the benefit is sanctioned (stopped) for thirteen weeks less any days between the claim and the job ending. If there is a statutory redundancy situation, whether it is voluntary or compulsory, it will NOT be classed as leaving voluntarily so the JSA will not be sanctioned (unless a claimant leaves earlier than they have to.)

[buildersmate]

Corbyloon is one of the people on here that know their stuff on JSA, so I don't propose to comment on that. It's kosher.

Severence is a generic term to describe a situation where an employee offers a payment for the employee agreeing to terminate an employment contract. Whether it is taxable or not depends on the terminology set out by the employer in the letter as to the reasons and timescales that describe the termination. It is often of no disadvantage to the employer to set out terms that enable the employee to avoid tax and NI on the payment. For example, the two parties may agree that the employer describes it as a redundancy.

But it isn't always the case and HMRC in any case sets financial limits (The £30k that FF refers to).

See this:
http://www.hmrc.gov.uk/manuals/eimanual/EIM12975.htm