Statutory redundancy pay
Will I receive a statutory redundancy payment?
You will be entitled to a redundancy payment if: –
- you are made redundant;
- you have at least two years continuous service since.
You must be working as an employee under a contract of employment the contract may be written or verbal or a combination. By turning up to work for an employer there is an agreement of employment. Self-employed people and members of a partnership do not qualify. Directors may be employees if they work under a contract of employment. They are unlikely to qualify if they have a controlling interest in the company.
You will also need to have been actually dismissed- i.e. not resigned. You may be invited to take voluntary redundancy, but this usually still qualifies as a “dismissal” by reason of redundancy.
What are the payments?
Many employers will only pay the statutory minimum redundancy pay, whilst others are more generous, for example, one month’s gross salary for every year worked. Generally, blue-chip companies and financial institutions are found to be more generous with redundancy payments.
An employer may also make an enhanced payment to take into account any shortcomings in the actual redundancy procedure and to ward of any potential tribunal claim. In turn the employee may be asked to sign a settlement agreement which will prevent you form bringing any subsequent unfair dismissal claim.
If you are being paid only the statutory amount, this will be governed by:
- How long you have been continuously employed by your employer;
- How your years of continuous service relate to a particular age band;
- Your weekly pay, up to a legal limit, revised as at 6th April 2021 to £544.00
The amount of redundancy pay is calculated as:
- Half a week’s pay for each full year of service where age during year less than 22
- One week’s pay for each full year of service where age during year is 22 or above, but less than 41.
- One and a half weeks’ pay for each full year of service where your age during year is 41+
To help you work out your statutory payment, you can use the Ready Reckoner for calculating the number of weeks’ pay due. Don’t forget, the week’s pay is subject to a maximum of £544.00 as of 6th April 2021.
When will I receive my Redundancy pay?
If the company you were working for is paying the redundancy, then it should be paid on the last day that you work or as soon as is possible.
If there is to be any long delay with the payment, then that needs to be discussed and agreed with the employee. If the employee feels that they have to wait too long, then they can take the employer to an Employment Tribunal.
What is my “calculations” date?
This is the date that you were given notice of your redundancy. The minimum notice period by law is usually one weeks notice per year of employment up to a maximum of twelve weeks.
The calculations date will be at the end of either :
- the minimum notice date;
- if you are given longer notice then the calculation will be made from the minimum date;
- the day your job ended with or without notice.
What is my entitlement as a director?
As directors, you may be qualify for a statutory redundancy pay if you work as an employee under a contract of employment
You will not qualify if you are :
- self-employed or member of a partnership;
- a Merchant Seaman, former registered dock worker engaged in dock work or share fisherman;
- a House of Lords or Commons staff, members of the Armed Forces;
- a government employee of an overseas territory;
- a Crown servant or employee in public office;
- an apprentice at the end of their training contract
When is my statutory redundancy payment due to be paid?
Your employer should give you a lump-sum payment at the termination of your employment.
What does a ‘Weeks Pay’ mean?
This refers to the amount of pay you receive under the terms of your contract for employment. The terms of your contract can be spoken, written or implied or a combination of all three. You should have received at the minimum a written statement of your main employment particulars within two months of the start of your employment.
If you were working normal hours and your pay did not change from week to week, your week’s pay will be your basic weekly wage or salary. Any overtime earnings will not be included unless overtime was part of your normal weekly working routine.
Your pay is averaged out over a 12 week period before the “calculation date”.
Your week’s pay is subject to the maximum statutory limit which is £544.00 from 6th April 2021. Employers can choose to pay more but at the minimum they need to pay at the very least the statutory minimum.
I work shifts how do they work out my redundancy payment?
If your normal working hours varied from week to week because of shift work, and your earnings vary as a result, a similar calculation is carried out, but the average hourly earnings are multiplied by the average weekly hours over the same 12 weeks.
If you had no fixed working hours, your week’s pay will be your average weekly earnings in the 12 weeks before the calculation date.
My hours were always different each week what will that mean to my payment?
If your earnings changed from one week to another because of piecework or productivity bonus arrangements, your week’s pay is worked out by multiplying the number of hours you normally worked in a week by your average hourly earnings over the 12 complete weeks of work before the calculation date. Only hours actually worked are taken into account. If the hours used in the calculation include hours outside normal working hours and paid at higher rates, the higher rate is ignored and the hours are worked out at the normal basic rate.
Do I need to have worked a certain amount of hours before I qualify for redundancy payment?
It doesn’t matter how many hours you work if you have worked continuously for the same employer for two years you are entitled to have a redundancy package.
What is the time limit to make a legal claim for a redundancy payment?
If there is a failure to pay, you must make a written request to your employer or to an employment tribunal within six months of the date the job ended.
Is statutory redundancy pay taxable?
You should not have to pay tax on a redundancy payment up to £30,000.