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Redundancy Payments - What you Need to Know About Redundancy

Most individuals are made redundant because the company can no longer afford to keep an employee in your role, then you may have the right to a statutory redundancy payment.

If you are an employee who has worked continuously for your employer for at least 2 years and you are being made redundant then you should have the right to a statutory redundancy payment. Your employer should automatically calculate this and pay it to you, but if they don't, then you should speak to them directly.

redundancy payments

How much redundancy pay you get is based on:

  • how long you have worked



  • your age



  • your pay (up to a certain limit which is currently £400 from 1st February 2011)


Please note that your employment contract may mean that you are entitled to more than the statutory minimum payout, so check your contract thoroughly.

Related: Helpful Tips to Find a New Job if You Have Been Made Redundant

You can work out your statutory redundancy pay with the following:

  • 0.5 week's pay for each full year of service where your age was under 22



  • 1 week's pay for each full year of service where your age was 22 or over, but under 41



  • 1.5 week's pay for each full year of service where your age was 41 or over.


So if you are 25, your weekly pay (including tax and National Insurance) is £300 per week, and you have given 6 years full service, you will receive £1,350.

  • 1 week x 3 years full service when you were 22 or above = 3 weeks



  • 0.5 weeks x 3 years full service when you were under 22 = 1.5 weeks



  • 3 weeks + 1.5 weeks = 4.5 weeks x £300 = £1,350


Another example is if you are 50, your weekly pay is £400 per week, and you have given 15 years full service, you will receive £7,800.

  • 1.5 weeks x 9 years full service when you were over 41 = 13.5 weeks



  • 1 week x 6 years full service when you were under 41 = 6 weeks



  • 13.5 weeks + 6 weeks = 19.5 weeks x £400 per week = £7,800


There is also a calculator online (http://www.direct.gov.uk/redundancy.dsb) which you can use to calculate the pay you might be entitled to.

Tax

Redundancy pay under £30,000 is not taxable. However other elements of your redundancy package such as pay in lieu of notice (money paid to you by your employer rather than asking you to work your full notice) is taxable.

Redundancy Notice Periods



If you have been selected for redundancy then your employer must give you formal notice in accordance with your employment contract. If there are no details in your employment contract, then the statutory minimum notice period will apply which is:

  • at least one week's notice if you have been employed between one month and 2 years



  • one week notice for every year (or part year) of employment between 2 and 12 years



  • 12 weeks notice if employed over 12 years.


Starting a new job during your notice period



If you have been continuously employed for two or more years, you have the right to take time off during your notice period to attend job interviews and/or training courses to assist you finding a new job.

If you have found a new job before your redundancy notice has expired you may be able to negotiate an early release without losing your redundancy pay. Most employers will be happy to accomodate your details.

If your employer is not prepared to release you early, you should write to them to state when you would like to finish. This is called a 'Counter Notice'. Your employer should formally write back to you advising whether you can finish early or not.

Be careful because if you leave your job before your notice period has expired, or without your employer's permission you could lose some or all of your redundancy pay.

If you think you have been treated unfairly



Your dismissal could be unfair if your employer does not have a fair reason for dismissing you, your employer did not follow the correct process, or you were dismissed for an unfair reason (such as wanting to take maternity leave). If you think you have been unfairly dismissed or made redundant then you should follow your company's greivance procedure. This should be written in your employment contract, and you should usually write a letter explaining your greivance to a department manager or Human Resources. The company should investigate the complaint and write back to you within a certain timeframe.

If you are not satisfied with your employer's response, and your employer agrees to it, you could try mediation through Acas (the Advisory, Conciliation and Arbitration Service) where a specialist will try to help you and your employer sort out the problem.

If you feel have been unfairly made redundant and talking to your employer or mediation doesn't work you should get some advice from Acas or Citizens Advice Bureau. You may have a case for unfair or wrongful dismissal.

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