Ex Gratia Payments Not Off-set Against Notice Pay

The Employment Appeal Tribunal has handed down its decision that the true construction of the meaning of the words used by an employer in a letter of dismissal in which it paid monies to an employee as an ‘ex gratia payment’ was a question of law.


Fiona O’Farrell was employed, as Director Head of Corporate, by Publicis Consultants LTD from April 2007 until her dismissal in May 2009.

O’Farrells contract provided for termination by either side with 3 calendar months notice. It went on to say that the company may at its absolute discretion require you not to attend work during the whole or part of your notice period, and may at its discretion relieve you of some or all of your contractual duties during that period.

In 2009 a redundancy situation arose and O’Farrell was selected for redundancy.

O’Farrell received a letter dated Thursday 14 May 2009 which notified her that her role was terminated by way of redundancy with effect from Friday 15 May 2009.

Set out in the letter were details of the final package due to O’Farrell and these stated:-

  • You will be paid up to and including Monday 18 May 2009.
  • Ex-gratia Payment equivalent to three months’ salary.
  • Statutory Redundancy Payment.
  • Holiday pay

She claimed damages for dismissal without notice and for breach of contract by failing to pay notice pay.

The Employment Tribunal Decision

The Employment Tribunals reached a decision that the dismissal was unfair and that the company was in breach of contract by failing to make a payment in lieu of notice.

The company appealed against the breach of contract claim.

The Employment Appeal Tribunal Decision

The Employment Appeal Tribunal described the payments made by the employer as follows:

  • Two are payments that the employer is making because it must make them; that is to say, the statutory entitlement to redundancy pay, and the contractual entitlement to holiday pay.
  • The third payment referred to in the letter of 14 May 2009 is in contrast a payment described in terms as “ex gratia payment”; that is to say, on its ordinary construction, a payment made freely and not under obligation.

The Appeal agreed with the Employment Tribunal that the words ‘ex gratia’ ordinarily import the sense of something being paid by way of gift or favour. Nothing in the language used in the letter of 14 May 2009 suggests or implies that that payment is in fact another form of payment that the company is legally obliged to make, ie a payment for a period of notice.

The appeal was dismissed.

Are You HR Compliant?

Green Arrow (150 x 120)

Is Your Business Compliant?

If I asked you whether your business was HR compliant would you know? Answer my simple questionnaire and I will send you a report detailing what I think you are doing well and what you need to change, particularly areas that are putting your business at risk.

HR doesn’t need to bureaucratic, but it does need doing otherwise you risk receiving time-consuming and expensive claims against your business.

Get the Latest Legislation News and My Top Tips delivered straight to your inbox

Let Me Buy You A Coffee!

If you found this helpful and you would like to learn more about how I work with owners of small business who want to improve their HR management, please go here.

Tap into and share the Kea world!

Don't forget to add Kea to your social networks and when you read an article that you like share it with your network!
Ex Gratia Payments Not Off-set Against Notice Pay
Tagged on:


Kathryn is a highly experienced HR Manager with a wealth of skills and knowledge acquired across a variety of industries including manufacturing, health and social care and financial services. She has worked in small localised business and larger multi sited organisations and is comfortable liaising with senior managers and union officials as well as answering queries from team members. Connect with Kathryn on:

Call Us