Amy Walpole of Howes Percival considers the impact of redundancy on financial settlements within Divorce settlements.
How could redundancy impact my divorce settlement?
The coronavirus pandemic has had a significant impact on so many aspects of our lives and society. HMRC published as of 16th August 2020 9.6 million jobs were furloughed in the United Kingdom as part of the Government's job retention scheme. Despite this, we have still seen redundancy consultations in many businesses and, as the scheme comes to a close, it is expected that further redundancies will follow.
Redundancy whether you are the employer or employee can have significant implications in divorce proceedings.
HOW COULD REDUNDANCY IMPACT ON THE RESOLUTION OF MY FINANCES ON DIVORCE?
You should immediately communicate with your former spouse if you are made redundant so it is not a surprise and alternate arrangements can be put in place. Maintenance would need to be carefully considered alongside the payer and payee’s future income needs. Consideration will need to be given to the redundancy package and any alternative employment prospects.
If a financial order has not been agreed it could allow for one party to seek an increased capital claim. Adjustments to the division of the marital capital can be made depending on the needs of the parties and the extent of family resources. There are many factors which would be taken into account to include the age of the parties, whether there are any children, the value of the capital pot and redundancy payment, future earning capacities and employment prospects and both your reasonable future needs. It is advisable you seek independent legal advice if you find yourself in this situation.
HOW DOES REDUNDANCY INFLUENCE THE AMOUNT OF MAINTENANCE I PAY?
All maintenance orders are subject to variation. In a redundancy situation it is open to the payer to make an application to vary downwards the level of maintenance or periodical payments. The court may not immediately be persuaded to reduce the payments as the redundancy package is intended to compensate for loss of income. The court may regard the redundancy payment as a capital fund from which maintenance can be paid.
Future employment prospects for the payer will be considered. In the event the payer can demonstrate there are no alternative employment prospects on the horizon and the redundancy payment is depleting, an application to vary maintenance downwards is the appropriate route. It is advisable to make the application before reaching a situation where it is unaffordable. If the payer allowed arrears to accrue they would need to make an application to remit or waive arrears to the Court. The payer is liable to pay maintenance pursuant with the terms of the order until it has been varied in writing and agreed between the parties, reassessed by the Court or Child Maintenance Service. The Child Maintenance Service can only intervene if the Order has been in place for a period of 12 months or more.
Anyone subject to a child support assessment who has been made redundant should contact the Child Maintenance Service and ask for a reassessment on the basis of their altered circumstances.
WILL MY SPOUSE HAVE A CLAIM AGAINST MY REDUNDANCY PAYMENT?
The court would take into consideration all assets, to include your redundancy payment. If, the redundancy payment is received after separation there could be scope to present a case that these funds should be treated as non-marital, and not be included as part of the settlement. Each case is considered on their individual circumstances, the outcome will vary in different situations. To be successful you will need to demonstrate there are other resources/capital available to meet your spouse’s needs.
Each case is considered on their individual circumstances so the outcome will vary in different situations.
I AM POTENTIALLY AT RISK OF REDUNDANCY AND TRYING TO AGREE MY FINANCIAL SETTLEMENT IN RELATION TO MY DIVORCE, WHAT CAN I DO?
It may be advisable to make an application for an adjournment if you have issued Court proceedings until the position becomes clearer or delay negotiations.
You would need to present evidence to support why you considered your position of employment at real risk of redundancy and demonstrate the financial implications should the situation arise. A timescale would need to be agreed for any proposed adjournment and you would need to show it was proportionate and balanced against the financial implications of not adjourning.
MY BUSINESS HAS BEEN IMPACTED BY COVID 19 AND I WILL BE MAKING REDUNDANCIES, IS THIS CONSIDERED AS PART OF MY MARITAL SETTLEMENT?
Your business interest will be taken into consideration as part of any marital settlement. The value of your business interest and whether it is liquid asset will form part of your financial disclosure. If, there are legitimate reasons to support a significant change to your business performance/profit these should be accounted for as part of this disclosure process. There are a number of technical arguments to support how your business interest should be treated. If redundancies and work levels have reduced within your business these should be identified. Your business interest is not necessarily treated the same as other marital assets.
If you have any questions regarding financial settlements on divorce during this time, or a general family law enquiry, please contact our Family team here.
Redundancy is a difficult time under any circumstances whether you are the employer or employee. Should you require advice concerning how to handle the redundancy process within your business or are involved in the process yourself we have an experienced employment team to offer you advice.
The information on this site about legal matters is provided as a general guide only. Although we try to ensure that all of the information on this site is accurate and up to date, this cannot be guaranteed. The information on this site should not be relied upon or construed as constituting legal advice and Howes Percival LLP disclaims liability in relation to its use. You should seek appropriate legal advice before taking or refraining from taking any action.
A leading commercial law firm whose clients range from individuals and families to global businesses and government departments.