How to calculate statutory redundancy pay for employees?
What is Redundancy?
As per Section 139 of the Employment Rights Act 1996, there are two situations under which a redundancy 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 to calculate statutory redundancy pay?
To calculate statutory redundancy pay you will need certain information like your age at which you were made redundant, year of redundancy and weekly pay (excluding taxes). There are certain weekly and overall caps on the amount you will get on redundancy pay. In UK, the redundancy pay per week is capped at £489 and for Northern Ireland it is £500. If you were made redundant after 6th April 2018, then the maximum weekly pay is £508 and maximum amount you can get is £15,240.
How to use the 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.
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.
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:
1. 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
2. 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.
3. 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.
Being Selected For the Redundancy:
As an employer, he can choose to cut short of his workforce if that is what the need of the hour, however he cannot decide casually on his redundancy decision and has to follow certain rules to ensure that the employees who are being made redundant are selected on fair and valid grounds. However, if your employer has decided to close down the entire operation or the company, in this case your job no longer exists and only in this case, he can make you redundant without following a selection process. However, in any other case, the employer has to follow certain methods/grounds/valid reasons to ensure fair redundancy.
Most commonly used methods/grounds for the selection are as below:
- Disciplinary Records
- Skills and expertise of the employees
- Voluntary Redundancy or Self-Selection
- Last In, First Out i.e. the employees who have served for the shortest period of time is selected first.
In case of a redundancy, you are entitled to have a consultation with your present employer and can speak to them on the reasons behind your redundancy and if there is any way out of it and if you feel that your redundancy is on unfair grounds or you haven’t got adequate time to make your alternate arrangements, you can challenge the redundancy. There is no fixed or defined time for how long period of consultation should be, however there are certain guidelines and timeframes which needs to be implemented in case of mass redundancies, such as:
- 20 to 99 Redundancies: In this case, the consultation should start at least 30 days prior to any dismissal.
- 100 or more Redundancies: In this case, the consultation should start at least 45 days before any dismissals take effect.
Depending on your profile, your employer might offer you an alternative opportunity, either in the same organization or an umbrella or associated organization and it is your call whether to accept it or not. Suitability of alternative job offered to you depends on:
- Nature of your current job and new job in picture.
- Employment terms of new job.
- If your present skills and expertise is in synchronization with the skills and expertise required for the new job.
- The remuneration and other benefits.
What is Redundancy Pay?
If you are made redundant by your employer, you are entitled to a payment from your employer and redundancy pay is of two types:
Statutory Redundancy Pay is the legal minimum which your employer has to pay to its redundant employee(s).However, the amount of statutory redundancy pay will depend on the following reasons:
- How long you have been in the job?
- If had signed a permanent open-ended contract with your employee?
- What is your age?
Redundancy Pay as per age should be as below:
Your Age Redundancy Pay Under 22 Half a week pay for each year of the service Between 22-40 A week pay for each year of service Over 41 A week and a half pay for each year of service
- What is your current salary?
At present, redundancy pay is capped at £14,670 in England, Wales and Scotland and at £14,700 in Northern Ireland i.e. your redundancy pay will be till or lesser than this value even if your present earning or your salary is higher than this.
For Example, Sally (aged 31) has worked part-time as a hairdresser for Curl Up and Dye for 10 years and two months earning £200 a week.
She’s just been made redundant. In her case, she will get:
- Half a week’s pay for the year she worked when she was under 22 = £100
- Nine week’s pay for the nine years she worked aged 22 to 40 = £1,800
So, she is entitled for £1,900 as redundancy pay.
However, there are certain exceptions to the statutory redundancy pay, under which your employer is not liable to pay you any statutory redundancy pay, such as:
- In case your employer has changed his mind on your redundancy and offered you to rejoin him: In this case, your employer is not bound to give you any redundancy pay.
- In case your employer has offered you an alternative profile: In case your employer feels that there is a better or an alternative profile based on your expertise and skills and offers you to be a part of the business with a different profile, but you decline the offer. In this case, your employer is not liable to pay any redundancy pay.
- In case you fall under one or more of the following categories:
- If you were a former registered dock workers and share fishermen.
- If you were crown servants, member of the armed forces or police services.
- If you are an apprentice and yet to become a full term employee.
- If you are a domestic servant who is also a member of the employer’s immediate family.
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
Tel: (01) 673 4500
Locall: 1890 800 699
For further information about the Redundancy Payments Scheme contact:
Workplace Relations Commission
Information and Customer Service
Opening Hours: Mon. to Fri. 9.30am to 5pm
Tel: (059) 917 8990
Locall: 1890 80 80 90
Fax: (059) 917 8909
Notice Period and Payment In Lieu of Notice Period:
Once your employer has decided to lay off with his existing workforce and has taken all required steps to ensure a regulated and fair redundancy of employees, it becomes imperative of him to give adequate notice period to his employees in order to find themselves a suitable job or to have a consultation with their existing employer for any alternate and suitable posting at their existing workplace.
Even when you are serving a notice period, you are entitled for statutory redundancy pay and your employer should either pay you through your notice period or pay you in lieu of notice depending on your circumstances.
Statutory notice periods are an essential part of your employment contract and you should read it carefully before you agree on the terms mentioned. In case of redundancy, your employer can you notice period more than what is mentioned in your employment contract, but he is bound to give you the statutory minimum mentioned in the contract.
- In case you have been employed between one month and 2 years, your notice period will be of at least one week time.
- In case you have been employed between 2 years and 12 years, you will be given one week notice period for each year that you have served.
- In case you have been employed for 12 years or more, you will be given notice period of 12 weeks.
In case, your employer is paying you in lieu of notice period, your employment might end without any notice period and you will be paid in lieu of your notice period. It is always good to add this term in your employment contract, however, even if it is not mentioned in your contract, your employer can still offer you to pay in lieu of notice period.
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