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What should I get as redundancy payment?

Redundancy is one way an employer can legally terminate your employment contract. However, whilst it is legal to make someone redundant, the process is regulated and your employer must follow certain steps in order to ensure the redundancy is compatible with employment law.

Redundancy occurs when an employer believes that the job a person is doing is no longer required or is affordable. Effectively, it is the position that is no longer needed, not the person. In order to compensate someone for redundancy the law may require a payment to be made to the individual. This is known as redundancy pay.

What is redundancy pay?

Redundancy pay is the payment of an amount of money to compensate someone for the loss of their job due to redundancy. Statutory redundancy pay is a legally required minimum based on UK employment law passed by parliament and, in addition to statutory pay; your employer may decide to offer more generous redundancy terms within your contract of employment. This may be in addition to statutory redundancy pay but can never be less than statutory redundancy pay.

Can I claim redundancy pay?

Not everyone who is made redundant can ask for redundancy pay. You can only request the statutory minimum if you have worked for your employer for at least two calendar years since leaving school and you are employed by the company, not working on a self-employed or short term contractual basis.

If you are working on a long term contract (more than two years), or if you have worked a series of back-to-back short term contracts amounting to more than two years total service then you may be able to claim redundancy pay.

You can lose your right to redundancy pay in some circumstances. For example, this may apply if your employer offers you an alternative job and you decide not to take this position without a good reason. 

How do I calculate redundancy pay?

Statutory redundancy pay is the legal minimum you are entitled to receive providing you meet the criteria for receipt of redundancy pay discussed earlier. The amount you will receive is based on the length of service for your employer, your age, and your salary worked out as weekly pay.

Your redundancy pay will amount to half a week’s pay for every completed year of employment when you were under the age of 22. Between the ages of 22 and 40 inclusive, your redundancy pay is one full week’s pay for every completed year of employment. For every year completed at the age of 41 or above you should receive a week and a half’s pay.

The maximum you can receive is for 20 years service. 

Your weekly pay is calculated based from your gross salary before any deductions are made for tax, National Insurance and other deductions, up to a maximum of £464. If you earn more than £464 a week then redundancy pay is capped at this amount. 

Your pay is calculated on the weekly salary you are earning when you are made redundant. This means that if you have recently cut your hours, your redundancy pay will be calculated based on your current lower salary, not the amount you earned if you were working full time.

If your weekly pay varies then an average is taken from the 12-week period prior to redundancy.

These calculations are based on the statutory minimum amount. You should always check your employment contract to see if you are entitled to receive more redundancy pay that the legal minimum.  

If your employer is taking their time to make the payment you should request the money in writing within six month’s of the end of your employment and seek advice from an employment lawyer.

More information on what you can do if you are made redundant can be found here.

You can calculate your potential redundancy pay here.

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