If you find yourself in the unfortunate position of redundancy, you will receive statutory redundancy pay based on your age and length of service to make the burden of finding a new job easier.
While some employers pay a greater amount than this scheme sets out, the framework for statutory redundancy ensures every employee receives a legal minimum form of financial compensation.
How do I calculate my statutory redundancy pay?
The amount of statutory redundancy pay depends on the employee’s age, gross weekly pay (pay before tax deductions) and full years of service (capped at 20 continuous service years, working back from the relevant date of the final day of the notice period)
- Aged 18 – 22 = half weeks’ pay (0.5) for every complete year of service worked for that employer.
- Aged 22 – 40 = one week’s pay (1) for every complete year of service worked for that employer.
- Aged 41 + = one and half weeks’ pay (1.5) for every complete year of service worked for that employer.
To work out your week’s pay, you need to calculate your average weekly earning in the 12 weeks before your redundancy notice.
For further information, the government has provided a statutory redundancy calculator to work out your entitlement.
Am I eligible for statutory redundancy pay?
To receive statutory redundancy pay, you must fulfil four criteria:
- Your redundancy must be fair and genuine.
- You must have worked for the same employer for a continuous period of two years. This can be a difficult timescale to confirm if there have been periods of sickness or a change in management.
- You must not be self-employed, employed as a police officer, serving in the armed forces, working as a crown servant, holding public office or being an employee of a foreign government if you are to receive statutory redundancy pay.
- You must be classed as an employee, whether full or part-time. To be classed as an employee you must be working under a contract of employment contract (you do not have to be a tax-paying employee). You could be classed as an employee if you are expected to work a minimum number of hours and you receive holiday pay.
It is vital that these criteria are satisfied. As they can be difficult to determine, it’s important to consult a solicitor who can guide you through the process and thoroughly examine your specific circumstances.
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We’re a City law firm with a high profile and an enviable track record in advising and representing employees from all parts of the employment spectrum, including fund managers, senior insurance brokers, leading bankers, hedge fund managers, middle managers, and ancillary staff. If you’re looking for expert advice on a potential redundancy or have been made redundant, we will give you practical assistance aimed at ensuring you’re treated fairly throughout the process. Please contact us for more information.
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Redundancy Pay FAQs
How much statutory redundancy pay am entitled to?
Whilst statutory redundancy pay is designed to protect you in the event of redundancy, it has a maximum payment of £643 per week (as of April 2023) and capped number of years of 20. This means your maximum statutory redundancy pay is £19,290.
Is statutory redundancy pay taxable?
Typically, the first £30,000 is completely tax-free, consisting of statutory redundancy pay, additional redundancy payments from your employer, and any kept company property after employment.
For more information, visit gov.uk for further information.
Can my payment be reduced?
There are circumstances in which your payment can be reduced such as if you agreed to take a lower wage to help the business through economic hardship before being made redundant. However, this will depend on the contractual agreement between you and your employer.
If you are on sick leave or maternity leave your redundancy pay will not be reduced and your weekly pay before the period of leave commenced will be used in the calculation.
When will I receive my redundancy pay?
Employers should ensure statutory redundancy payments are paid either on the date you leave work or on a date you both have agreed on. Your payment should be explained to you and should be received in your bank account as if it was a wage.
If you have problems receiving your statutory redundancy payment from your employer you should contact a solicitor immediately.
Can I lose my right to statutory redundancy pay?
There are situations in which you can lose your right to statutory redundancy pay to ensure the system is not biased against your employer.
Many employers, especially small employers with close-knit teams, may try to find an alternative job for you within the company. If this is the case and you refuse the other job without what is deemed to be a good reason then you will lose your right to redundancy pay.
You can also lose redundancy pay by leaving before your job has ended. You may leave for a good reason such as an offer of employment elsewhere or you have moved out of the area, but you must do so in the knowledge that you will not receive the redundancy pay.
In addition, if you do something that is deemed to be gross misconduct during the period between being told of redundancy and the job ending then you will forfeit your right to statutory redundancy pay.
Is redundancy forced?
While some employers such as the police cannot make certain staff redundant, most employers have the right to make employees redundant. However, as an employee, you have a right to check that your redundancy has been fair.
If the business is in decline, your skills are no longer of use or there has been a takeover then your redundancy may be fair and genuine. However, if you are made redundant on discriminatory grounds, because of a dispute with your employer or for whistleblowing then the redundancy will be deemed unfair and not genuine.
Where a redundancy is found not to be fair or genuine then it can be challenged and another form of financial redress may be open to you. It is vital where there is doubt as to whether your redundancy is genuine that you seek advice from employment law specialists.
