The golden rule at any dismissal meeting is not to agree or disagree with any departure terms suggested. Ask for any proposals to be put in writing, then consider carefully what you wish to achieve; is it simply to obtain the biggest pay-off possible or are other issues also important, such as getting help with finding another job?
It is important to assess the strength of your negotiating position. Is the company anxious to make a stock exchange announcement? Does it need your resignation as a director or trustee? Are they concerned about you joining a competitor? What is the reaction of the board: are they sympathetic or antagonistic? How have they treated others dismissed at a similar level? Once you have an offer, the next step is to compare it with your legal entitlement.
On dismissal you have two potential claims, one contractual and the other statutory. If you are dismissed without due notice (and without a reason justifying summary dismissal), the starting point for calculating contractual compensation is an amount equal to the value of the net salary and fringe benefits (such as the use of a car or pension contributions), which you would have received during your notice period.
Distinct and separate from an employee's contractual rights are those provided for by statute. Employees who have at least one year's continuous employment with their employer at the date of dismissal may make a claim for unfair dismissal. Awards in respect of unfair dismissal comprise two parts: the 'basic award' and the 'compensatory award'. The basic award is a relatively nominal sum, subject to a maximum of £360 (depending on age) for each completed year of employment (up to a maximum of 20 years). The compensatory award is determined by an Employment Tribunal and is generally aimed at compensating the employee for his financial losses. It is currently subject to a maximum of £51,700.
Claims in respect of unfair dismissal must be submitted to the Employment Tribunal within three months of the date of dismissal. Late claims are usually time-barred. Contractual claims of up to £25,000 can also be submitted to the Employment Tribunal, otherwise they must be pursued in the County or High Court. There is no qualifying period of service required for court actions and the time-limit is six years from the date of the alleged breach.
In addition to the executive's strict legal entitlement, there are a number of ways in which one can seek to improve the settlement. Many executives are granted share options. Save in limited circumstances (such as retirement or redundancy), share options which have not been exercised by the dismissal date usually lapse with immediate effect, even if the executive is executive's strict dismissed without justification.
Other points on the executive's shopping list there are a number of should include the provision of outplacement ways in which one consultancy or, better still, a cash contribution towards the provision of such services. An can seek to Improve attempt should be made to ensure that fringe the settlement benefits such as private medical insurance cover and life assurance cover are kept in place at least until the company's normal group policy renewal date. The executive should also explore the possibility of retaining useful pieces of equipment such as a laptop computer, fax machine or mobile telephone, which are of little value to the employer, but often of great use to the executive. Executives with a company car should investigate the possibility of buying it from the employer at its book value. For accounting purposes, the book value of the car is depreciated by a uniform amount each year. This rate of depreciation often does not reflect the market value of the car, which is usually somewhat more. Finally, the executive should not lose sight of the importance of obtaining a reference in order to assist in the search for another job. If possible, the form of the reference should be agreed and the employer be required to give a commitment to deal with all oral enquiries in a manner consistent with that reference.
Written by Ian Hunter, partner. First published in www.industrynow.com in April 2001.