Redundancy payments


Redundancy payments are made after someone loses their job through redundancy. In the UK there are two sources of redundancy payments, either:

  • A statutory redundancy payment, the amount of which is determined by law
  • A contractual redundancy payment that is paid when an employer operates a redundancy scheme

Who is entitled to redundancy pay?

Redundancy takes place when a company decides that the role, rather than the individual, is no longer needed. Redundancy is common when companies are:

  • Downsizing
  • Changing the products or services they offer
  • Following a merger when roles in the two merging companies are often duplicated

Although redundancy payments can help soften the blow of losing your job, not every employee in the UK is entitled to receive the statutory redundancy payments.

The main piece of legislation governing redundancy pay is the Employment Rights Act 1996. An employee must have been working at the firm for at least two years to have redundancy pay rights. After the employee has been at the firm two years they will be given one week of pay for every year worked, depending on the age of the employee, up to a statutory maximum.

You may be able to negotiate a bigger redundancy payment with your employer, and some contracts of employment will allow for a more generous redundancy payment. If your employer is offering you more than the statutory minimum in order to avoid an unfair dismissal claim, an employment solicitor should be consulted.

Exceptions to redundancy pay

Short term casual workers, self-employed workers, and contractors are unlikely to qualify for statutory redundancy payments.

Certain categories of employees are never entitled to statutory redundancy pay. These categories include:

  • 'share fishermen’
  • civil servants
  • The police

Although some aren’t entitled to the statutory payment, nothing stops an employer from including an entitlement to redundancy pay in a contract for employment at the same or even better rates than the statutory rate.

In some situations someone who qualifies for a statutory payment may lose their entitlement. This is the case if your employer offers you suitable alternative employment that you turn down, or if you decide to leave your job before the redundancy date.

Statutory payments

The rates of statutory redundancy payments vary from year to year, and also vary depending on your age, how long you’ve worked for your employer and how much money you earn.

The age calculator pays:

  • Half a week’s pay for each complete year of work aged under 22
  • A week’s pay for each complete year of work aged 22 to 40
  • A week and a half’s pay for each complete year of work aged 41 or over

Contractual payments

Statutory redundancy pay rights will not be required if you have a contractual agreement that will entitle you to more money than the statutory minimum. However, if your contract states that you should get less than your redundancy pay rights under statute, then statute will prevail and you will be entitled to the greater amount.

It is usual that an employer will pay the required amount at the end of your period of work; however, if they do not, then you will be able to get your redundancy pay rights enforced in an employment tribunal. This is when a solicitor will be required to ensure your rights are upheld, and Caven has a UK-wide network of employment solicitors who will be able to provide help with your case.

Thinking about instructing a solicitor? See our information page on redundancy solicitors.

Are you unsure of your entitlements to statutory redundancy pay? Has your employer offered you a compromise agreement that you need checking? Caven can put you in touch with specialist employment lawyers, apt to deal with any issue of redundancy law you may face. Please call us on 08001 221 2299 or complete the web-form above.

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