Liquidation Pay

[Ken]

Fabio,

I was recently told that the practice of liquidating employees every year so that the cost is spread over a period of years rather than paid by the employer in one large lump sum was illegal. I was also told that the present government is actively discouraging this practice because it means the employee who is truly liquidated has very little to live on because the amount of liquidation pay he receives is very small.

Is it true the practice is illegal? What are the risks of continuing the practice? Is it possible, for example, that the government might require payment of the full entitlement at the time of actual liquidation because the money paid in installments was paid illegally?

Thanks,

Ken

[Fabio J. Guzman]

The Supreme Court handed down a ruling not too long ago declaring the practice as illegal, despite the fact that its most vocal supporters were the workers themselves who expected some extra money to supplement their Xmas bonus every year. The risk of continuing the practice is, as you stated, that the employer may have to pay severance pay twice.

[MommC]

most likely employers will lay off all non skilled workers and re-hire others! Like a lot of the resorts do to keep costs down!!
And the turnover of skilled workers will definitely increase.
I know one company that regularly "moves" workers from one of their companies to another every four months so they don't have to pay "liquidation" at all!! This practise will likely increase.......
The only thing that happens here is that the name on the paycheque changes and sometimes the "supervisor".