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Am I entitled to redundancy pay?

The question today is: “Am I entitled to redundancy pay”?

Redundancy payments will be paid by your employer if you are an employee and:

  • You are on a permanent contract and
  • You have been working 2 continuous years with your employer and
  • You have recently been made redundant.

There are some exceptions where redundancy pay will not be paid.

As of 1st September 2013 a new form of employment contract came to life (The employee shareholder contract) With this contract instead of receiving Statutory Redundancy Pay an employee receives shares in the company between the amounts of £2000- £50,000.

Dismissal by Redundancy Information

Redundancy is a reasonable form of dismissal by an employer however they must follow the correct procedures. Redundancy is made when there is limited or no work available for you and your fellow colleagues. This may happen if a company downsizes or relocates.

An employer must follow the below steps to ensure an employee’s redundancy is dealt with fair and correct.

  • All employees must be told of any proposed redundancies for companies with 20 or more staff, formally known as Collective Consultation.
  • Since changes to the Agency Workers Regulations were made in 2013 all employers must inform the Trade Union of exactly how many employees and temporary employees work for the company and what work they are carrying out.
  • An employer must embark on a consultation with the employees who are affected or their representative with the possibility of reaching an agreement. This is not by any means negotiating but more communication about your redundancy and alternative ideas like voluntary redundancy, reduction in hours/ wages and also job sharing.
  • Employers making 20 or more redundancies must complete a consultation period of 30 days, for 100 redundancies this increases to 90 days. Failing to do so can lead to employees being entitled to a Protected Award. As of the 6th April 2013 the 90 day consultation will reduce to 45 Days.
  • Defining the redundancy pool – This is where your employer must select in a fair way which employees will be made redundant, this should be a fair process and not discriminatory.
  • Suitable Alternative Employment – Your employer must consider offering alternative work if suitable and available.
  • An employer must pay your redundancy package.

An Employment Tribunal could see a redundancy as being an Unfair Dismissal if the above steps are not properly implemented.

Temporary Lay Off

SRP can also be claimed if an employee has been temporarily laid off for more than 6 non-consecutive weeks within a 13 week period or for more than 4 weeks in a row.

Within 4 weeks of your last none working day you must write to your employer informing them of your intention to claim Statutory Redundancy Pay.

Redundancy Notice

For each completed years’ service with the company your employer must grace you with 1 week notice up to a maximum 12 weeks (3 Months) you should be paid for your notice period.

Other Redundancy Information

  • If you re-sign you will not be entitled to redundancy
  • If you volunteer for redundancy and are accepted you qualify for redundancy pay.
  • You can still qualify for redundancy if you ask to leave earlier (Your employer must agree to you leaving earlier)
  • If you are offered a reasonable alternative job by your employer you may accept on a 4 week trial, if after this period you do not wish to take the job you will still receive your redundancy pay, If you decide to take the job after the 4 weeks or stay employed after the 4 weeks you will be forfeiting your redundancy payment.
  • If an alternative job is not a reasonable alternative to your old job for example different location or worse conditions you may turn it down and take your redundancy Payment.
  • By refusing a reasonable alternative job by your employer you may not be entitled to redundancy Pay.
  • Your employer must still keep you informed of redundancies if you are off sick or on leave
  • If you receive SRP it will not affect any other benefits or job seekers allowance claims.
  • You must be granted time off to look for alternative employment if you are being made redundant and have served at least 2 years’ service
  • As of 2013 the first £30,000 you receive in redundancy is tax-free.
  • You may make a claim if you do not receive SRP when you are entitled

Statutory Redundancy Pay how is it calculated?

Based on your length of service, Age and weekly earnings.

As of 1st February 2013

  • Up to the age of 21 you will receive 50% of your weekly pay for each completed year of service
  • From 22 -40 years old, you receive 1 full weeks’ pay for each year
  • Over 41 years old you will receive 1 and a half weeks pay for every year serviced.
  • A maximum of 20 years’ service is applied.

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 2013 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 years’ service that can be counted is 20
  • £450 is the maximum weekly pay as of 1st February 2013
  • The total Maximum pay you can receive is £13,500 from 1st February 2013

How much should you receive?

  • If no overtime is stated in your employment contract this will not be counted as stated in the Employment Rights Act 1996
  • For fixed hours you will receive the normal pay for a week’s work
  • For variable hours (Commissions, bonuses etc.) the multiply the normal working hours by the average hourly rate over the previous 12 weeks.
  • For shift work this would be your average weekly hours at the average hourly rate over the previous 12 weeks
  • For normal working hours the weekly pay it is the average pay that was paid to you over the previous 12 weeks