What is Redundancy Pay?

If you’ve been working for your current employer for last two years then you’ll be entitled to get the redundancy money. The legal minimum is called ‘statutory redundancy pay’.

There are 2 types of redundancy pay that you could avail:

  1. Statutory redundancy pay – As per law you’re allowed to get the money.
  2. Contractual redundancy pay – As per the contract you could get more money.

Redundancy, in general terms, is a form of dismissal from your job and it generally happens when the employer is in loss and need to reduce their workforce. In this case, the employer will let go of the employees who, in his opinion are no more required by the business or who are not being productive to add any qualitative contribution.

What is Redundancy?

However, in case you are being made redundant by your employer you might be entitled to redundancy pay and it is very important for you to understand and know about your rights, such as:

  • Your redundancy pay
  • Notice period
  • A discussion with your employer
  • The option to move into a different job
  • Time off to find a new job for yourself

As an employer, he has lot of freedom to reduce the workforce as per his business requirement, however there are certain rules which need to be followed and if you are one of many who is being made redundant by your employer, you need to check if your redundancy was made in a fair way or not and irrespective of the duration of your work with your employer, you need to check on three important things if you are at the risk of redundancy, such as:

  • Check if your employer has been fair: There are various grounds based on which your employer has decided to make you redundant, however if his reasons fall in one of the below, it would be considered as a discrimination, such as:

    • Based on your gender
    • Based on your sexual orientation i.e. if you are a gay, lesbian, a transgender, a bisexual etc.
    • Based on your disability.
    • Based on your religious beliefs.
    • Based on your age.
    • If you are pregnant and on maternity leave.
    • If you belong to a particular race, country or ethnicity
  • Check if the reason behind your redundancy is fair: Your redundancy will be considered unfair if the reason(either in whole or in part) falls in one of the below mentioned categories:

    • If you have asked for your basic rights at work, such as minimum wages, holiday or maternity leave.
    • In case you have complained regarding health and safety measures of your workplace.
    • If you are a whistleblower i.e. if you have reported against illegal acts of your employer.
    • If you work in a shop and have demanded for your holiday on Sundays.
    • If you have been on a jury service.
    • If you are in a trade union or have been on an official strike.

    Above reasons are termed as “automatically unfair reason” and anyone who is being made redundant on one of the above mentioned ground, can challenge against his or her redundancy and in case more number of employees have been made redundant under same circumstances or because of same reasons, it will be easier for you to show and prove your case of unfair redundancy.

  • If there was a group consultation in case of mass redundancy: In case you are a part of redundancy pool in which there are 20 or more employees, your employer should have a group consultation with the pool before making all of them redundant in one go. In case there was no consultation before you were made redundant, it will be considered as an unfair redundancy.

Redundancy Pay Calculator

* This calculator is only for reference purposes. For accurate and detailed report, please consult with an accountant. *

Who can get statutory redundancy pay:

In below conditions an employee could avail Statutory Redundancy Payments:

  1. Employee who is having an employment contract
  2. Have continuously worked with the employer for last 2 years

Who won’t get statutory redundancy pay

You could miss statutory redundancy pay in below conditions:

  1. You’ve worked less than 2 years in your job
  2. You’re self-employed
  3. You’re a police officer or might be working in the armed forces.
  4. You’re a crown servant, parliamentary staff or holder of public office (Ex- a justice of the Peace)
  5. are a share fisherperson
  6. You’re a domestic staff working for your immediate family
  7. If you’re an employee and working for any foreign Government.

In case you’re not allowed to get statutory redundancy pay, you could be able to get contractual redundancy pay. You must check your contract and make sure what is written there about redundancy payments.

Are you entitled to redundancy pay?

You'll get the right to redundancy pay when you've continuously worked for your employer for 2 years or more than that.

As per Section 139 of the Employment Rights Act 1996, there are two situations under which a redundancy pay may occur, which are:

  • The fact that his Employer has ceased or intends to cease:

    • To carry on the business for the purposes for which the employee was employed by him, or
    • To carry on that business in the place where the employee was so employed, or
  • The fact that requirement of that business –

    • For employees to carry out work of a particular kind, or
    • For employees to carry out work of a particular kind in the place where the employee was employed by the employer, has ceased or reduced or is expected to cease or reduce.

How much redundancy pay will you get?

The amount of statutory redundancy pay you’re eligible to avail depends on the below conditions:

  1. How long you’ve been doing your job
  2. The age you were in each year you worked there, and
  3. If your per week based maximum current salary is £525 in 2019-2020 (for Northern Ireland the amount is £500)

You could get an complete amount of redundancy pay which is capped at £15,750 in 2019/2020 (£16,410 in Northern Ireland), even if your actual incomes are higher or your length of service period is longer than this.

Only comprehensive years of service count, and service needs to be constant.

Here’s what you should get:

Your age Redundancy pay
Below 22 years Half of the week’s payment against each year of serving for the employer
22 to 40 years Payment for a week for each year of service
Above 41 years A week and a half’s payment for each year of serving to the employer

Contractual Redundancy Pay for Employee

Is the extra payment which you get if you are getting redundant. However, not everyone is entitled for this payment and it can only be enforced if it is mentioned in your employment contract.

How to calculate redundancy pay?

You’re required to pay at least the statutory amount to your employees.

Use the DNS redundancy pay calculator. This link opens in a new window to work out an employee’s statutory redundancy pay. The calculator will deliver the total amount you’ll get and also show you the elementary separation of how that amount has been arrived at.

The amount of redundancy pay each employee gets basically depends on 2 factors- their age and how long they’ve worked for you. It’s covered at 20 years – working back from the date you made them redundant. You should pay:

  • 1.5 weeks pay for each year of work after their 41st birthday
  • 1 week pay for each year of work after their 22nd birthday
  • half a week for each year of work before their 22nd birthday

The limitation for the weekly payment is £525. The maximum total amount of statutory redundancy payment is £15,750.

You must properly review your employment contracts as you could require to pay more than the statutory amount.

You could select to pay higher amounts once you would like to inspire voluntary redundancies.

In case the pay of your employee’s varies from week to week

Evaluate the average weekly payment for the earlier 12 weeks from the date you made them redundant.

Once they didn’t work for an entire week during that time – like they were off due to illness or might be in holiday – replace it with an earlier week.

You need to inform your employees in written about how you’ve deducted the redundancy payment.

Calculating redundancy pay - An example

Julia (aged 31) has worked part-time as a hairstylist for Dye and Curl Up for 10 years and 2 months receiving £200 a week.

Julia (aged 31)

She’s just been made redundant.

She gets:

  • Half a week’s payment for the year she worked when she was below 22 years = £100
  • Nine week’s pay for the nine years she worked aged 22 to 40 = £1,800

So overall Julia gets £1,900.

What is Redundancy Pay?

How to Use The Redundancy Pay Calculator?

Simply follow the given steps to arrive at the statutory redundancy pay –

  • Input your actual age at the time at which you were made redundant and had to leave the job.
  • Then check whether you were made redundant before 6th April 2018 as rates after this date are higher.
  • Now provide your weekly pay at the time you were made redundant excluding taxes and number of years you have worked for that particular employer.
  • Select your country of work and residence. North Ireland has slightly higher limit on weekly and overall payment.
  • The calculator will provide you total amount you will get and also show you the basic segregation of how that amount has been arrived at.

Pay in lieu of notice and holiday pay

Pay in lieu of notice

At the time you’re made redundant your employer should provide you a statutory of one week’s notice for up to 2 years’ service along with one week’s notice for the each year you’ve offered service to them (it could be a maximum of 12 weeks’ notice). You must properly go through your employment contract to check whether a longer has been mentioned there that your contractually allowed to.

You might be anticipated to continue on working at the time of your notice period, but you could be allowed to leave earlier and sometimes instantly. In this case you’ll get pay in Lieu of notice (PILON). This is effectively compensation from your employer for completing your contract early.

All PILON payments whether contractual or non-contractual are subjected to income tax and National Insurance deductions.

This means all basic payment that you were supposed to have received is taxed in the similar way irrespective of whether you’ve worked during the time of your notice period.

Payment for dissolutions over and above the individuals which are deemed PILONs will still get the advantage from £30,000 tax and NIC exemption.

Holiday pay

You should never overlook holiday payment part! In case your holiday is payable, your employer must pay you for the same or let you avail the vacation before you leave the job.

Find out if you have any holiday owing.

How to Apply for the Redundancy Pay?

Ideally, you should get your redundancy lumpsum on the date of your termination and in case you haven’t got your due amount, you can apply for the same to your employer by using form RP77 and in case your employer refuse to pay you your due share, you can further apply to the Department of Social Protection for direct payment from the Social Insurance Fund.

The application for payment from the Social Insurance Fund should be sent to:

Redundancy Payments Section

Department of Social Protection Floor 2, Block C The Earlsfort Centre Lower Hatch Street Dublin 2 Ireland

Tel:   (01) 673 4500 Locall:   1890 800 699

For further information about the Redundancy Payments Scheme contact:

Getting your redundancy pay

The date you’ll leave from the work, your employer must clear your redundancy payment. Sometimes a later date can be fixed for making payment where both the parties are agreed for calculating and clearing the redundancy payment.

They’ll maintain the similar payment process that exactly they used to follow for paying your remuneration, like using your bank account for sending your money.

A written statement showing the details about your payment calculation will be given to you.

If you don’t get your redundancy pay

Your employer must maintain the similar process for paying you the redundancy pay as exactly they paid your salaries. In case they do not maintain the similarity you could take the required steps to get your payment.

You may contact your nearby Citizens Advice once you need any more help at any stage.

Take the following steps:

Step 1: write your former employer a letter

You need to tell them what you’re permitted to and contain any proof you have to back up your argument.

Step 2: early conciliation

You should contact Acas in case you don’t get your payment even after sending your letter.

Acas offers self-governing support in order to help to sort out any work related disputes. They’ll check if your employer will agree to a process called ‘early conciliation’ – Without going to a court there is a way of resolution of the disputes.

The fastest way to initiate is to fill in the early conciliation form on the Acas website. You can give a call to the Acas early conciliation team on 0300 123 1122

Step 3: take your employer to a tribunal

Your last option is to take your employer to a court. But going there could be expensive and stressful, so it’s better to get assistance from your local Citizens before you take any legal step.

The limit for demanding any redundancy pay you’re payable is 6 months minus a day from the last day you were employed. If you’re also demanding for biased dismissal or notice pay, then you have 3 months less a day.

What if your employer’s gone bust?

In case your employer goes out of the business then still you’ll get statutory redundancy pay and holiday pay which are payable to you. But you need to demand them from the State instead from your employer. For demanding money use this service in case your employer is payable redundancy payment to you along with other money like remuneration, holiday and commission. Your employer should be incapable to pay you as they’re ruined. The special managers will guide you after providing you the details about how to apply and offer you a case reference number. You’ll need this before you’ll go to start your claim. You can then make your demand through online on the redundancy page of GOV.UK

You might then contact the Insolvency Service if you require help using the service on 0330 331 0020 (choose option 2).

If you stay in Northern Ireland you’re not allowed to apply to the Insolvency Service. You can find out about your rights in Northern Ireland in case your employer is ruined.

Your employer isn’t paying up – what can you do?

In case you think your employer is paying you the incorrect amount of redundancy pay or in case you’re not happy with the way you’re being treated, start by talking to them about it.

You may attempt your trade union rep if you have one.

When this won’t work you could make a complaint using your employer’s complaint process.

You should make a complaint to the employment tribunal in case the matters remain unresolved

It’s advisable to talk to your employer first regarding any problem.

  • Visit the Acas website (England, Wales and Scotland) or contact them on 0300 123 1100.
  • Visit the Labour Relations Agency website (Northern Ireland) opens in new window or contact them on 028 9032 1442.

Statutory Redundancy Pay FAQs

How is redundancy calculated?

Provided you have two years’ nonstop service with your employer and are an employee, you will be allowed to a legislative redundancy payment on being made dismissed. This can be calculated as follows: half a week’s pay for each year of employment up to the age of 22; this is a statutory extreme limit to a week’s pay.

How much is 2019 statutory redundancy?

In case you were made dismissed on or after 6 April 2019, your weekly payment is capped at £525 and the highest legal dismissal payment you could avail is £15,750. In case you were made redundant before 6 April 2019, this amount would be lesser. Payment for redundancy including any compensation pay that is below £30,000 is not taxable.

Who pays statutory redundancy?

Calculating statutory redundancy pay must consider your age throughout your employment. Presently the payments are calculated the below way:

For every year that you’ve worked for the employer when you were below 22 years, you would receive half of a week’s salary.

Do I have to work my redundancy notice period?

Based on how long you’ve been working you should be given the minimum legislative notice period of 1-12 weeks. Though in case you’re taking gardening leave you’ll usually leave work as early as you receive your redundancy notification.

Can you get redundancy pay if you are self employed?

Freelancers and people who are self-employed generally not allowed to avail Statutory Redundancy pay. Likewise, directors of companies generally don’t have any right for the same. Employees on fixed-term contracts are permitted to SRP in case the period of the contract is two years or more and this is not reintroduced by purpose of redundancy.

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