Anything to do with redundancy is a worrying process, whether you’re making staff redundant or being let go yourself. For the employer, some of the regulations and calculations can be difficult. Here, we look at some of the important considerations which have to be taken in account.
Statutory Redundancy Pay is what most employers would pay their staff, although some may choose to pay above the statutory amount, which is termed Non Statutory Redundancy Pay. Most employees who have worked for their employers for 2 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
- If you are aged 41 or older, then you would 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.
Any redundancy payment would also include any notice period payable that is not worked, plus any holiday owed. However, 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 at the time 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. An example is where the employer has offers a suitable alternative job which is then not taken up without a good reason. Also, where you 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.
It is a complex field, and we’d recommend that appropriate advice is sought. 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.