Updated for 2012

Who is entitled to a Redundancy payment?

You are entitled to a payment from your employer if you are an Employee and:

  • You have a permanent (open-ended) contract and
  • You have at least 2 years continuous service with your Employer and
  • You are made redundant.

There are a few exceptions where people are not entitled to Redundancy Pay – see the Direct Gov site here for more information.

If you are employed on a Fixed Term Contract, with 2 years continuous service, which ends without being renewed because of a redundancy situation you may also be due a redundancy payment. See the information on this information on the Direct Gov site.

See our article here about potential changes to Redundancy law in 2012.

Information on Dismissal by Redundancy

Redundancy is a ‘fair’ means of dismissal by your Employer if the procedures they follow and the circumstances are correct.  A Redundancy situation is applied when there is no more, or not enough, work for you and your colleagues (for example if your employer closes or relocates the business, or now needs fewer workers).

Your employer needs to take the following steps to ensure the redundancies are ‘fair’:

  • Employees need to be informed of proposed redundancies (the Trade Union and Labour Relations Act 1992 requires employers with more than 19 staff to inform and consult relevant union or employee representatives about their proposals before they are implemented).
  • Your Employer must undertake Consultation, with the ‘affected employees’ (or their representatives) with a view to ‘reaching agreement’.  Individual consultation (that follows collective consultation where this is required) should take place before any redundancy dismissals are confirmed.  Consultation is not negotiation, but the communication your Employer has with you about Redundancies – it must be more than just an announcement and they should consider alternative ideas to redundancy (e.g. voluntary redundancies, reducing pay, reducing hours, job sharing etc.) and explain their decisions to you.
  • Your Employer must select those who are at risk of redundancy in a fair way (this is called defining the redundancy ‘pool’) – the factors they use in deciding who stays and who goes must be fair and not discriminatory.
  • They must consider offering you any alternative work that is available and suitable.
  • They must pay you your Statutory Redundancy Pay entitlement.

Without all these steps being taken your Redundancy could be seen as an Unfair Dismissal by an Employment Tribunal.

 

Other useful information about Redundancies

  • You will not be due a redundancy payment if you resign.
  • If your employer needs people to volunteer to take redundancy and you volunteer and are accepted you will qualify for a redundancy payment and appropriate notice period.  (Your Employer is likely to reserve the right NOT to accept all voluntary redundancy applications).
  • If you have been given notice of redundancy you can ask to leave earlier.  If your employer agrees to this you will still qualify for a redundancy payment.
  • If your employer offers you a new job that is a reasonable alternative to your old job you can accept the new job on a 4 week trial period.  If at the end of the 4 weeks you do not want to stay in the new job you will still qualify for a redundancy payment (if you stay in the new job after these 4 weeks you will be considered to have accepted the new job, if you don’t say differently, and will forfeit your redundancy payment).
  • If you are offered a new job that is not considered a reasonable alternative to your old job (e.g. worse conditions of employment, different responsibilities or location) you can turn the new job down before the end of the trial period and take your redundancy payment.
  • If you refuse an offer of a new job that is considered a reasonable alternative without a good reason you may not be entitled to a redundancy payment.
  • If a redundancy situation arises while you are away on maternity or adoption leave (and from April 2011) on Additional Paternity Leave,  you must be offered a suitable alternative vacancy if one is available,  For information on maternity leave and redundancy please see our Guide To Maternity Leave.
  • If you are off work due to sickness your Employer should be in regular contact with you if there is a redundancy situation to explain the situation and keep you informed of opportunities and news.
  • When you receive Statutory Redundancy Pay (SRP) this does not affect any entitlement you have to claim Job Seekers Allowance or other benefits.
  • Your employer may offer enhanced redundancy pay and notice periods in your contract.
  • You have a legal right to take time off to look for work if you are declared redundant (and have at least 2 years service).
  • The first £30,000 of redundancy pay is tax free at the moment.
  • If you do not automatically receive SRP, when you are entitled to it, you can make a claim to an Industrial Tribunal.

Short-term and temporary lay-off

Statutory redundancy pay can be claimed from your employer if you have been temporarily laid off for either more than four weeks in a row or more than six non-consecutive weeks in a 13 week period.

You should write to your employer telling them you intend to claim statutory redundancy pay. This must be done within four weeks of your last non-working day.

Notice of Redundancy

The minimum notice of redundancy your Employer must give you is 1 week for each completed year of service you have with them (up to a maximum of 12 weeks).  You should be paid for your notice period or receive pay in lieu of this time.

Statutory Redundancy Pay (SRP)

This is calculated depending on your age, length of continuous service with your employer and your weekly earnings.

From 1st February 2012 SRP is calculated as follows -

  • You receive half a weeks pay for each completed year of service up to the age of 21
  • You receive 1 weeks pay for each completed year of service between ages 22 and 40
  • You receive 1 and a half weeks pay for each completed year of service over the age of 41.
  • The maximum number of year’s service that can be counted is 20.
  • There is also a limit on what can be counted as a weeks pay – £430 per week is the maximum from 1st February 2012.
  • The total maximum statutory redundancy pay you can receive (from 1st February 2012) is £12,900.
  • SRP is not taxable.

Direct.Gov SRP Calculator

NB Your employer may offer more generous redundancy payments in your contract (but SRP will be included within this higher payment).

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Workline is supported by Employment Lawyers Goodman Derrick LLP.  Please note that the advice given on this website and by our Advisors is guidance only and cannot be taken as an authoritative interpretation of the law. It can also not be seen as specific advice for individual cases. Please also note that there are differences in legislation in Northern Ireland.

Photo by David Jones – CC