Senior exec exits from top businesses have surged since the start of the year as firms quietly clear out highly-paid staff before fresh costs associated with the Employment Rights Act changes come into force.
Law firms have seen a “massive uptick in inquiries” from top staff exploring their legal options after being told they face the chop, according to Merrill April, partner at CM Murray.
“What’s remarkable about it is the volume of people being asked to go across all sectors… but also I think the unceremonious rush to get it done,” April told City AM.
April cited a recent inquiry from an exec asked to attend a consultation meeting on a Friday, with a second meeting scheduled as soon as the following Monday, in signs employers are ramping up the speed of exit processes.
Despite sluggish growth and the spectre of AI taking jobs, April put the timing and speed of these recent clear-outs down to January’s uncapped compensation regime.
Top earners kicked out before cap lift #
In rules set to be introduced under the Employment Rights Act in January, the current compensation cap for unfair dismissal of £123,543 or one year’s salary will be removed entirely.
Businesses are concerned that the cost of layoffs will balloon in 2027 because senior executive salaries comfortably exceed the current cap. The reform also includes contractual bonuses, benefits (including pensions), equity and carried interest, making future redundancy packages look hefty.
“[There] is a lot more cherry picking of people who are senior and expensive… or they don’t quite fit for some reason, or sadly, in some cases it’s to do with people taking various kinds of leaves, and so those people are being sort of cherry picked out while companies can still do it relatively cheaply,” April said.
Tensions are likely to flair up between companies and top brass facing the axe as C-Suite executives are often more familiar with the quantum of redundancy packages offered in the past, according to April. “They’ll get this package, and they’ll say, ‘this is just not fair, this is not how we normally do things, I just want to be treated fairly’,” she said.
Execs are often surprised to discover that contractual restrictive covenants remain in force even though they are being made redundant. Under the law these covenants are enforceable regardless of the reason for exit, exposing another key area for negotiation.