How much is redundancy pay?
Share this article...
Statutory Redundancy sets the minimum payment to be made.
You will be entitled to statutory redundancy pay as an employee if you’re made redundant after working for your current employer for 2 years or more. You should receive half a week’s pay for each full year you were under 22, and one week’s pay for each full year you were 22 or older (but under 41). You’ll get 1.5 weeks’ pay for each full year you were 41 or over.
You may be entitled to more, dependent upon the terms of your contract of employment, and your employer’s redundancy policy if they have one, but a week’s pay is capped at a statutory maximum – see current rates.
What are the stages of Redundancy?
Before making you redundant, your employer should go through a redundancy consultation process. This will involve a series of consultation meetings with you, applying objective selection criteria in order to choose who should be selected for redundancy, and checking if there are any suitable alternative roles available elsewhere in the organisation.
What is Statutory Redundancy?
Statutory Redundancy Pay must be paid to employees who are made redundant after more than 2 years’ employment with their employer. It is calculated on a formula based on your age, length of service, and weekly pay. The amount of weekly pay that can be used to calculate Statutory Redundancy Pay is capped each year – see our Employment Facts and Figures for more information.
Statutory Redundancy Pay is paid in addition to notice pay (or having you work your notice period) and payment in respect of accrued holiday.
What should a Redundancy Policy include?
A redundancy policy should include details around the consultation process that the employer will use if they need to make redundancies. It should also set out how long the consultation process will take, what the employer will do to avoid redundancies, and any provisions regarding finding suitable alternative employment elsewhere in the organisation.
Specific requirements apply where an employer proposes to make 20 or more redundancies in a single workplace. If the redundancy policy covers large numbers of redundancies, it should deal with these requirements as well.
Where will I find my Employers Redundancy Policy?
Not all employers have a redundancy policy. If your employer does have one, it will usually be in the Staff Handbook, which is sometimes called an Employee Handbook, or it may be on an intranet as one of a collection of policies and procedures. If you can’t find one, ask HR, or the person responsible for staff matters in your organisation, if there is a redundancy policy.
Redundancy & Settlement Agreements
Sometimes, employers will want to avoid going through a full redundancy consultation process, for commercial reasons, and to minimise disruption and uncertainty across the workforce. As a way of avoiding a full process, employers may offer a Settlement Agreement to those they anticipate selecting for redundancy, usually with an offer of compensation greater than the employee would get if they were only paid their basic entitlements to notice, holiday pay and Statutory Redundancy Pay, to help persuade the employee to sign the agreement.
Settlement Agreements are also used where an employee has raised objections to their selection – such as where they believe they have been unfairly selected ahead of someone else, or where the procedure has been deficient.
Settlement Agreements are the only way by which an employee can waive their claims against their employer. For a Settlement Agreement to be valid, the employee must get independent legal advice on the terms and effect of the agreement. Remember that your employer wants you to sign the Settlement Agreement so that they know you won’t come back and bring a claim – it’s their risk management tool and often necessary where the employer wants to take a “commercial” approach.
An enhanced redundancy policy will set out how a payment is calculated.
How much notice for Redundancy?
If you are made redundant, you’ll be entitled to receive notice of termination, or be paid in lieu (instead) of working for your notice period.
Statutory minimum notice periods apply – if you’ve been working more than a month, you’re entitled to a week’s notice. Then it’s basically one week’s notice per year of service up to a maximum of 12 weeks’ notice after 12 years’ service. However, if your contract has a longer notice period that your employer must give, that longer period will apply in a redundancy.
Employers will usually want to pay you in lieu of notice when you’re being made redundant. Pay in lieu of notice has to be taxed in the same way as if you were working and still being paid salary.
How is Redundancy calculated?
Statutory Redundancy Pay is calculated on a formula: [appropriate amount] x [number of years’ service] x [weekly pay, subject to cap]. The “appropriate amount” is either 0.5, 1, or 1.5 depending on your age during each year of employment. The weekly pay amount changes each year – see our Employment Facts and Figures for more information.
Is Redundancy Unfair Dismissal?
If your employer hasn’t followed a fair redundancy consultation process, and/or unfairly selected you for redundancy, then your dismissal could be unfair. So, in the “commercial” scenario above, where your employer offers you a Settlement Agreement rather than going through a full consultation process, your dismissal could well be unfair – the employer is seeking to settle that claim by paying you compensation and having you sign a Settlement Agreement. In our experience, this is very common. Most employees will make a deal in this scenario and sign a Settlement Agreement.
Redundancy when Pregnant
If you are selected for redundancy when pregnant (assuming your employer knows you’re pregnant), that is likely to be an unfair dismissal on the basis that you’ve been unfairly selected for redundancy. It’s also probably automatically unfair, so you wouldn’t need the usual 2 years’ service to be able to claim. It may also be sex and/or pregnancy discrimination.
However, there is currently no additional protection during pregnancy – though changes are expected soon (as at July 2023). By contrast, if you are made redundant during maternity leave, then you’re entitled to be offered any suitable alternative employment ahead of anyone else (apart from another woman on maternity leave who the role is also suitable for). This doesn’t apply to pregnant employees.
Redundancy & TUPE
If your employment transfers to a new employer under TUPE, then you go over with all your terms and conditions intact, including length of service. Any dismissal in connection with a TUPE transfer is automatically unfair unless it’s for an “economic, technical or organisational” reason. A redundancy will often be an organisational and/or an economic reason for TUPE purposes.
However, the old employer can’t make you redundant just because the new employer doesn’t need you – they don’t have a reason to make you redundant. The new employer would have to go through a full consultation process or risk an (automatically) unfair dismissal claim – see above under “Redundancy & Settlement Agreements”.
Share this article...
More on this topic