redundancyThe asking of this poignant question has been an unfortunate sign of the times of late. For the majority of people, the answer to this question is quite simple, however there are a few other things that are worth bearing in mind if you find yourself facing redundancy.

The basics

Employers are only legally obliged to make redundancy payments to members of their workforce who satisfy all of the below criteria:

  1. The person is an employee (i.e. not self employed or another category of worker).
  2. Upon the date that they are to be made redundant (i.e. their last working day for the employer), the employee has worked for the employer for a continuous period of more than two complete years.
  3. The reason the employee is being dismissed, is either for redundancy, or because they have become eligible for a redundancy payment because they have been laid off or kept on short-time working.

Due to point 2 above, it can sometimes be the case that an employer will consider paying employees “in lieu of notice” to avoid them completing their second year of service during their notice period, and therefore becoming entitled to a redundancy payment.

The amount payable

By law, the calculation for a statutory redundancy payment is as follows:

  • One and a half weeks’ pay for each complete year of service after age 41.
  • One week’s pay for each complete year of service between ages 22 and 40.
  • Half a week’s pay for each complete year of service under the age of 22.

The amount of a “week’s pay” is capped, and the current rate is £430. This rate is usually increased each year, typically around February. In addition, only a maximum of 20 years’ service can be taken into account when calculating a redundancy payment. The current maximum statutory redundancy payment, therefore, is £12,900.

Other points to consider

It is also worth investigating whether your employer is likely to make any payments over and above the statutory amount. You might find this in your contract of employment or within a redundancy policy.

Losing your entitlement to a redundancy payment

The right to a redundancy payment can be lost. Examples of how an employee can cause this include:

  1. Unreasonably rejecting an offer of suitable alternative employment.
  2. Failure to work their contractual notice period.
  3. Misconduct – if an employee is dismissed for gross misconduct without notice before their redundancy payment otherwise becomes due.

By Katie White

Filed under: Employment Law