Your Money: Caught between two jobs

You resign from your job to take up a better one - then the offer is withdrawn. What compensation can you claim? By Ian Harper

Harry is still recovering from every employee's nightmare. Having happily worked for one company for some years he was offered an attractive job elsewhere. However, before he was due to start work his future employer decided that it did not need him after all.

The problem was aggravated when it became clear that his old employer had found a suitable replacement, and did not want Harry back. He discovered that he had only a limited claim for compensation against his erstwhile future employer.

It is important to ensure, before resigning from one job, that the offer of new employment is unconditional. If the new job is subject to a satisfactory medical examination, or the provision of good references, the employee should make sure that these conditions can be met before handing in his or her notice to the present employer.

If the offer of employment involves relocating to another part of the country, or even overseas, the employee should check the contract carefully. If the contract specifies only a short notice period and the future employer decides, before the employment commences, to withdraw the offer, the employee will have only limited financial remedies.

The starting-point for calculating damages in these circumstances will be 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 been receiving during the notice period provided for in the contract. The employee has a duty to seek to reduce the loss suffered by finding alternative employment.

If the notice period provided for in the offer of employment is short, such as a month, the compensation payment payable will probably be modest.

The damages payment will not take account of the loss of job security suffered by the employee as a result of accepting the offer of employment and resigning from his previous occupation.

Nor will the employee normally be able to recover damages for any relocation costs he or she has incurred as a result of accepting the new job, such as removal expenses and estate agents' and solicitors' fees. In order to recover such costs the employee would need to show that they were incurred at the request of the future employer, in order that the employee could carry out his duties more effectively.

Claims for breach of contract should be pursued in the county or high court - depending on the sums claimed. Such claims must be submitted within six years of the date on which the claim arose.

Compensation payable in such cases will not take account of any statutory protection that employees forgo as a result of having resigned from their previous employment.

Currently, employees who have completed more than two years' continuous employment on dismissal have a potential statutory claim in respect of unfair dismissal. This two-year limit is currently being considered by the House of Lords. These claims are made up of two parts. The first, the basic award, is subject to a maximum of between pounds 105 and pounds 315 in respect of each completed year of employment, subject to a total of 20 years. The second tier, the compensatory award, is subject to a maximum of pounds 11,300.

On dismissal, as opposed to a situation where an offer of employment is simply withdrawn, normally up to the first pounds 30,000 of damages may be paid to an employee free of tax. However, this tax-free concession will not be available in cases where the breach of contract occurs before the employment has commenced. Damages paid for breach of contract are treated as a capital gain and are, subject to the individual's personal allowances, taxed accordingly.

In many cases employees are happy to accept an offer of employment which provides for limited protection if the other is withdrawn prior to the commencement date, because the risk of such an eventuality is remote.

However, those who decide to accept more speculative employment should consider negotiating a longer initial notice period. The rationale is that the longer the employee's notice period, the greater the potential claim if the employee is dismissed without notice.

An alternative is to insist on an agreed payment if the employment is terminated within a set period of time after the offer has been accepted. This may reduce the scope for argument between the parties regarding the amount of damages payable in such circumstances.

Where possible, the employee should seek to negotiate a contribution to relocation costs when a move is necessary as part of accepting the job offer. It is just as important for consideration to be given to seeking a further relocation payment if the employment is terminated within a short period of time, and the employee is forced to move again in search of other employmentn

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

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