Out of work? How to make the best of a bad job

Downsized? Delayered? Ian Hunter explains that by knowing your rights you won't leave empty-handed

An Economic upturn is no guarantee of job security as many will agree. Company takeovers, cost-cutting and reorganisations leave a constant stream of employees heading for the door. In such situations it is important to know what your employment rights are and how any offer made to you might be improved.

Every employee is entitled to receive notice, in effect advance notice, that they are to lose their job. The exception is if the employee is dismissed for gross misconduct, such as theft.

If you are dismissed without proper notice you will be entitled to damages as the employer will have committed a breach of contract. Likewise if the employer gives notice and allows that employee to serve out the notice period, the employer will be in the clear. Once the notice period is up it will have no financial liability.

However, if the employee is dismissed without notice and without justification the starting point for damages is a sum equal to the value of the net salary and fringe benefits (such as the use of a car or pension contributions) that the employee would have received during the notice period. The cost of such fringe benefits should be calculated according to the cost of the employee replacing them rather than the cost to the employer of providing them.

If the employee does not have a written contract of employment, or the contract contains no express notice period, that employee will be entitled to a statutory minimum period of notice of one week for the first two years of employment and one additional week for each additional year of service, up to a maximum of 12 weeks. Employees may be able to argue for damages for longer period of notice based on what is considered reasonable or typical in their area of work.

Those are an employee's contractual rights, but employees who have two or more years of continuous service have additional rights under law, called statutory rights. These may be able to claim for unfair dismissal, especially if they have not been given prior warning of dismissal.

Claims for unfair dismissal are decided according to what is regarded as "just" and "equitable" and are made up of two parts, a basic award that can amount to between pounds 105 and pounds 315 for each completed year of employment, depending on age, and compensation of up to pounds 11,300. The catch is that to get this money you are going to have to take your former employer to an industrial tribunal (and win the case), which may not help future employment prospects.

One major factor in determining the size of any award is the length of time that the tribunal believes it will take the employee to find another job.

Contractual claims up to a maximum of pounds 25,000 can also be submitted to an industrial tribunal, otherwise dismissed employees may have to resort to the courts. In many cases employers will seek to reach an amicable settlement with employees before using a tribunal or court. Usually up to the first pounds 30,000 of any damages payment can be paid free of tax. Amounts over pounds 30,000 are taxable. However, subject to Inland Revenue limits, amounts in excess of the first pounds 30,000 can be paid into pension schemes without deduction of tax. Such payments must pass directly from the employer into the scheme. Employees should ensure the obligation is contained in any settlement letter agreed with an employer.

Beyond the strict legal limits there are benefits that employees may be able to secure that are of value but cost little or nothing extra to the employer. References are often of importance in the search for future employment. The employer is under no legal obligation to provide a reference. But if possible the content of any reference should be settled before the terms of departure are agreed. If the employee is a member of a company health insurance scheme or has life insurance through their workplace, he or she can often be retained on the company's policy until the end of the contract's current year. This is because the employer often pays a single annual premium for all its employees and will incur no extra cost by allowing the employee to remain a member.

Employees who have company cars should investigate the possibility of buying their car at the company's own (depreciated) assessment of its value, which may well be lower than the market value.