Do you know your rights with redundancy payments

Embargoed to 0001 Monday May 16''File photo dated 03/06/07 of a man using a chip and pin machine. People focused on paying off their debts could mean UK retailers face a decade of non-existent or declining growth, especially if they are based outside of London according to the Ernst & Young's ITEM Club. PRESS ASSOCIATION Photo. Issue date: Monday May 16, 2011. The economic think-tank that mirrors the Treasury's economic model, made the gloomy prognosis in a special report on UK consumer spending. The report forecasts consumer spending will grow by just 0.6% this year and 1.3% in 2012 as depressed wage growth and rising inflation squeeze incomes. The spending figure rises to 2.2% in 2013, but ITEM warns that even this anaemic number may be too optimistic, with possible interest rate rises, lack of credit, a further decline in confidence and rising commodity prices likely to make consumers even more cautious. See PA story CITY Consumer. Photo credit should read: Steve Parsons/PA Wire ENGEMN00120110516095449
Embargoed to 0001 Monday May 16''File photo dated 03/06/07 of a man using a chip and pin machine. People focused on paying off their debts could mean UK retailers face a decade of non-existent or declining growth, especially if they are based outside of London according to the Ernst & Young's ITEM Club. PRESS ASSOCIATION Photo. Issue date: Monday May 16, 2011. The economic think-tank that mirrors the Treasury's economic model, made the gloomy prognosis in a special report on UK consumer spending. The report forecasts consumer spending will grow by just 0.6% this year and 1.3% in 2012 as depressed wage growth and rising inflation squeeze incomes. The spending figure rises to 2.2% in 2013, but ITEM warns that even this anaemic number may be too optimistic, with possible interest rate rises, lack of credit, a further decline in confidence and rising commodity prices likely to make consumers even more cautious. See PA story CITY Consumer. Photo credit should read: Steve Parsons/PA Wire ENGEMN00120110516095449
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Making staff redundant or being made redundant is a worrying process and, along with all the decision-making, the calculations can be quite difficult to understand.

Statutory redundancy pay is what most employers would pay their staff, although some may choose to pay above the statutory amount – this would be called Non Statutory Redundancy Pay.

Most employees who have worked for their employers for two years or more would qualify for redundancy pay. The amount you will receive is based on age and length of service.

Under 22-year-olds would receive half-a-week’s pay for each full year they have worked.

Those aged over 22 and under 41 would receive one week’s pay for each full year of service.

Those aged 41 or older receive one-and-a-half weeks’ pay for each full year.

For Statutory Redundancy Pay the maximum number of years is capped at 20 years for calculating the amount payable.

The maximum payable per week is capped at £475, which means the maximum statutory redundancy payable is £14,250. Pure redundancy pay is not taxable.

Your redundancy payment would also include any notice period payable that is not worked and any holiday owed. But holiday pay, pay in lieu of notice and any other amounts that are pay for your work rather than compensation for the job loss are taxed as pay.

If you changed from full-time work to part-time work and then you are made redundant shortly afterwards, your weekly pay will be calculated at the part-time rate. This is because the calculations are based on how much you are earning when you are made redundant.

If you get paid commission on a regular basis, this should be included in your week’s pay. A week’s pay does not include overtime pay unless the overtime was regular and you have to do it as part of your job.

If your earnings vary each week, an average of the 12-week period leading up to the redundancy is used. All these variables are important when working our redundancy pay entitlement.

There are some circumstances in which you can lose your right to statutory redundancy pay.

Some examples of these circumstances include:

- if your employer has offered you a suitable alternative job which you have refused to take up without a good reason

- if you want to leave before the date your employment is due to end, for example, if you’ve found another job. However, you may still be able to keep your redundancy pay as long as you follow certain procedures.

Redundancy is hopefully something that we don’t want to experience ourselves, however if you are in this situation getting the facts and figures correct is vital.

For more information or help with redundancy please contact us.