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Do I qualify for redundancy pay?

To work out whether or not you qualify for redundancy pay, you should first look at your employment contract. If it doesn't mention a payment (or you don't have a written contract), you may still be legally entitled to statutory redundancy pay.

Generally, to qualify for statutory redundancy pay:

  • you must have worked as an employee;
  • continuously for the same employer for two years over the age of 16;
  • your employer must dismiss you (actually, constructively, or on expiration of a fixed-term contract);
  • the reason for dismissal must fall within the statutory definition of redundancy;
  • you must not unreasonably refuse an offer of suitable alternative employment; and
  • you must claim redundancy within an established time limit.

(1) Working as an employee

You are classified as an employee if you work under a contract of employment.

A contract need not be in writing -- it exists when you and your employer agree terms and conditions of employment -- and can be implied from your actions and those of the person you are working for.

If you are self-employed, a worker or an independent contractor, you probably do not qualify as an employee.

(2) Continuously for two years

Generally, to qualify for statutory redundancy pay you must work continuously for the same employer for at least two years over the age of 16 prior to being dismissed.

If you have less than two years continuous service, however, an employment tribunal has discretion in some circumstances to waive this requirement.

(3) Dismissal

For the purposes of redundancy, dismissal occurs when your employer terminates your employment contract, a fixed-term employment contract expires without being renewed, or you are constructively dismissed.

Dismissal may also encompass short-term or temporary employees who are laid off for at least four continuous weeks or six non-consecutive weeks in a 13 week period. It does not encompass leaving by mutual agreement or resignation -- unless, of course, you are constructively dismissed.

(4) Reason for dismissal falls within statutory definition of redundancy

A redundancy can occur if there is closure of a business or workplace, or a diminishing need for an employee to do the work available.

Generally, your job must disappear for you to be made redundant. But it can also happen if someone else's job disappears and they are moved into your job, making you redundant. This is known as redundancy bumping, or transferred redundancy, and often happens when a more senior employee is prepared to take a more junior role to avoid redundancy.

You should also note that if you were dismissed because of gross misconduct, you are not entitled to redundancy pay, even if your employer is making other employees redundant and you would otherwise qualify for redundancy.

(5) Offers of re-employment

Redundancy pay is designed to compensate you for the loss of your job. Thus, if you are re-employed by the same or an associated employer, you may lose your entitlement to redundancy pay.

You may also lose your entitlement to redundancy pay if you receive and unreasonably refuse an offer of "suitable alternative employment" from the same or an associated employer within four weeks of your previous employment ending.

The law grants you time to try out the new job for up to four weeks before deciding whether or not to accept it. If you have reasonable grounds for not continuing in the job, you can still claim redundancy pay.

The reasonableness of turning down the job will depend on your personal circumstances and a number of other factors, including: place of work; salary; work hours; holiday entitlement; employment status; and commute time.

Note also that you may lose your right to redundancy pay if you have been selected for redundancy and you start a new job with a different company before your redundancy notice period has expired.

(6) Time limit

When you receive a statutory redundancy payment, your employer should give you a written statement of how they calculated the amount so you can check its accuracy. If your employer fails to pay you it or you dispute the amount, you may opt to pursue a claim before an employment tribunal.

You should know, however, that there is a time-limit on making a claim for redundancy pay. Generally, if you fail to send written notice of your claim to either your former employer or the tribunal within six months of dismissal, your claim will be time-barred.

The tribunal has some discretion to extend the time-limit to 12 months from dismissal, but only if it considers it "just and equitable."

(7) Insolvent employers

If your employer is declared insolvent or cannot pay redundancy pay, you can apply for a direct payment from the National Insurance Fund. As a first step, write to your employer asking for redundancy pay. Then, if they are unable to pay, fill out Form RP1 available from the Insolvency Service.

(8) Employees not eligible for statutory redundancy pay

Certain categories of employees are barred from claiming statutory redundancy payments. These include:

  • members of the armed forces;
  • House of Lords and House of Commons staff;
  • some apprentices (although you should check your contract);
  • some employees with fixed-term contracts before 1 October 2002 (check your contract of employment);
  • domestic servants working in private homes who are members of the employer's immediate close family;
  • share fishermen paid only by a share in the proceeds of the catch;
  • Crown servants or employees in a public office; and
  • employees of the government of an overseas territory.

In many cases, however, these employees will have an entitlement to contractual redundancy.

(9) Amount of statutory redundancy pay

The amount of redundancy pay you receive depends on how long you have been employed, your age, and your weekly pay before tax:

  • for each year of continuous employment between the ages of 16 and 21 you will get half a week's pay;
  • for each year of continuous employment between the ages of 22 and 40 you will get one week's pay;
  • for each year of continuous employment between the ages of 41 and 65 you will receive one and a half weeks' pay.

Note, however, that there is an upper limit of £464 (gross) on the amount of weekly pay you can claim, and a maximum overall statutory redundancy payment limit of £13,920.

In addition, any period of continuous employment over 20 years will be disregarded.

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