Basic guide to redundancy

This factsheet outlines some basic information on redundancy.

An employee will normally be entitled to statutory redundancy pay if they have been working for their current employer for 2 years or more.

 

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1) Redundancy entitlement

  • ½ weeks’ pay for each full year under the age of 22 of age
  • 1 weeks’ pay for each full year from 22 – 41 years of age
  • 1 ½ weeks’ pay for each full year 41+ years of age.

Length if service is capped at 20 years
 
Weekly pay is the average an employee earned over the 12 weeks prior to the day of redundancy notice.

N.B
If an employee was paid less than usual as they were on furlough, then the redundancy pay should be based on what would have normally been earned.

On or after 6th April 2020, weekly pay for redundancy purposes is capped at £538 and the maximum statutory redundancy pay is capped at £16,140.
 
Redundancy pay (including any severance pay) under £30,000 is not taxable.
 
Employers will deduct tax and NI contributions from any wages and/or holiday pay owed.
 

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2) Not entitled to redundancy

There are some reasons why an employee may not be entitled to redundancy.

Please see below some of these reasons:

  • Employees will not be entitled if the employer decides to keep the employee on.
  • If the employer offers the employee suitable alternative work and the employee refuses without good reason.
  • If the employee is dismissed for misconduct.
  • If you fall into one or more of the following categories:
    • Former registered dock workers (covered by other arrangements) and share fishermen.
    • Crown servants, members of the armed forces or police services.
    • Apprentices who are not employees at the end of their training.
    • A domestic servant who is a member of the employer’s immediate family.
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3) Short-term and temporary lay-offs

An employee can claim statutory redundancy pay if they are eligible and have been temporarily laid off (without pay or less than half a week’s pay) for either:

  • more than 4 weeks in a row
  • more than 6 non-consecutive weeks in a 13-week period

Employees must write to their employer telling them they intend to claim statutory redundancy pay. This must be done within 4 weeks of your last non-working day in the 4 or 6-week period.

If the employer does not reject your claim within 7 days of receiving it, write to the employer again giving them the employees notice.

The claim could be rejected if any normal work is likely to start within 4 weeks and continue for at least 13 weeks.
 
This factsheet is only intended as a brief overview.

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