(Adds employee reaction, website link)
By Tom Bergin
LONDON, July 7 (Reuters) - Royal Dutch Shell haschanged its redundancy terms so it can claim tax refunds thatsome UK workers would otherwise have been able to claim onredundancy payments, internal documents seen by Reuters show.
The move comes as the Hague-based oil giant is slashing5,000 jobs this year following the collapse in oil prices andits merger with smaller UK rival BG Group.
The UK government allows employees who have worked part oftheir career overseas to reclaim some, or in some cases all, ofthe tax due on severance payments.
On April 1 this year, however, Shell introduced "targetedtax equalization of severance payments", whereby "Shell willclaim any tax reliefs or tax refunds on the severance paymentthat are available," according to a presentation to staff.
The tax refunds in question can be claimed in relation toex-gratia lump sum severance payments, rather than legal minimumredundancy. This means that Shell can include the right to claimany tax refund linked to the employee's overseas service as aterm of the ex-gratia severance package.
Shell said the change was consistent with its policy ofsmoothing out the impact of tax on employees moving overseas,aimed at ensuring staff face the effective tax rates of theirhome country no matter where they work.
The equalisation policy means Shell incurs higher costs whenan employee goes on assignment to a higher tax jurisdiction andreceives a saving when one moves to a lower tax jurisdiction.
The company declined to say whether the application of theequalisation policy to redundancy payments would save money.Spokesman Jonathan French said Shell's severance packages were"currently among the most generous in the sector".
"The policy is designed to promote equal treatment ofemployees with the same home country," he said.
One Shell employee facing redundancy told Reuters hebelieved the measure was driven by costs rather than fairness.
"If my tax went to the government I probably wouldn'tcomplain," he said.
Ude Adigwe, an organiser with the GMB labour union inScotland, said the measure was unacceptable.
"It would seem that companies are trying to defray or offsetthe impact on their finances by putting the burden on theordinary worker," he said.
POLICY CHANGE
The cost to British workers of Shell's policy change couldbe significant.
In an example cited in one Shell presentation, an employeeentitled to 100,000 pounds ($129,410) severance, who faces amarginal tax rate of 45 percent and has spent half their careerabroad, would receive 68,500 pounds after tax and equalisation.
If an employee enjoyed the full benefit of the foreignservice tax relief, they would receive almost 16,000 poundsmore. If they had spent 75 percent of their career abroad thepayment would be tax free.
Shell declined to say how many people might be affected bythe policy change which should mostly affect UK employees.
Shell said in December it planned to cut 2,800 jobs afterits takeover of BG but did not say how many UK workers wouldlose jobs. Shell completed the deal in February and announcedanother 2,200 cuts in May, 475 of which would be from its oiland gas production division in the United Kingdom and Ireland.
Usually companies don't take account of the foreign servicetax break when calculating employees' payoffs as part of largescale redundancies, said David Whincup, employment partner atlaw firm Squire Patton Boggs.
This means it is up to the departing worker to claim back arefund in respect of the Foreign Service Relief, but followingits policy change Shell will claim the benefit instead.
Employment experts said Shell's approach was not common,although Alain Cohen, director at employment law firm AshbyCohen, said he had heard of another oil company doing the same.
According to a report produced by law firm Mayer Brown in2013, a company needs to reach agreement with the UK taxauthority, Her Majesty's Revenue & Customs, before it can beginsuch a scheme.
The UK tax authority declined to comment on the Shell case,citing taxpayer confidentiality.
Copies of one presentation have been published on Shellprotest site: http://royaldutchshellplc.com/
($1 = 0.7727 pounds) (Editing by David Clarke)
