In the United Kingdom, redundancy pay is a legal entitlement for employees who are made redundant, subject to meeting certain criteria. The rules regarding redundancy pay are outlined in the Employment Rights Act 1996. If you are facing redundancy in the UK, it is important to be aware of your legal rights. Your employer is obligated to follow specific rules when making you redundant.
Here are the key points:
Eligibility: To qualify for statutory redundancy pay, an employee must have a minimum of two years of continuous service with their employer. Continuous service generally means working without a break of one week or more.
If You Don’t Qualify for Redundancy Rights: If you have worked for your employer for less than two years, you may not qualify for statutory redundancy pay. However, your employer is still required to follow a fair selection process.
The Redundancy Process:
Your employer can make you redundant for three main reasons:
- Complete business closure, which may be temporary.
- Workplace closure, which can apply to a specific location.
- Reduced requirement for employees, such as restructuring, changes in equipment, or a decrease in available work.
The selection process must be fair and based on objective criteria that can be reviewed. You have the right to understand the process used and why you were chosen. Your employer is legally obligated to avoid using discriminatory criteria, whether directly or indirectly.
Your employer must provide you with advance warning and engage in consultation with you. Meetings should be conducted in person, but given the current circumstances, they may be conducted via phone or video call. This allows you to raise concerns or propose alternatives to avoid redundancy. Different rules apply to consultation when more than 20 employees are being made redundant.
Your employer must take steps to minimise redundancies. They should offer you suitable alternative employment, if available, or consider voluntary early retirement if applicable. Additionally, they must ensure that you receive your redundancy pay.
Calculation: The amount of statutory redundancy pay is based on the employee’s age, length of service, and weekly pay.
There are two components to the calculation:
a. Length of service: The employee is entitled to:
- Half a week’s pay for each full year of service under the age of 22
- One week’s pay for each full year of service between the ages of 22 and 41
- One and a half week’s pay for each full year of service over the age of 41
b. Weekly pay: The weekly pay is subject to a statutory limit, which is reviewed annually. The current limit is £643 per week. If an employee’s weekly pay exceeds this limit, the calculation for redundancy pay is based on the limit. The limit is changed annually and the rates are specified here.
Length of service cap: The maximum number of years of service that can be taken into account for calculating redundancy pay is capped at 20 years.
Statutory redundancy pay limit: There is also a limit on the total amount of redundancy pay that can be awarded. The current limit is £19,290. The rates are reviewed annually and are updated here.
It’s worth noting that these rules apply to statutory redundancy pay, which is the minimum amount an employee is entitled to by law. Some employment contracts or collective agreements may provide for enhanced redundancy pay, which can be more generous than the statutory minimum.
Please keep in mind that employment laws can change over time, so it’s advisable to consult the latest official sources or seek professional advice for the most up-to-date and accurate information regarding redundancy pay in the UK.
A redundancy pay calculator is available on the Government website.
Redundancy Notice: If you are being made redundant, you are entitled to a minimum amount of notice as determined by law:
- If you have worked for your employer for over one month but less than two years, you are entitled to a minimum of one week’s notice.
- If you have worked for your employer for two to twelve years, you are entitled to one week’s notice for each year worked.
- If you have worked for your employer for more than twelve years, your minimum notice entitlement is twelve weeks.
During the notice period, you should receive full pay, separate from your redundancy payment.
If your employer decides not to require you to work your notice period, they can choose to provide a payment in lieu of notice. However, you are only obligated to accept this if it is stated in your employment contract. This arrangement can still be offered by mutual consent of both parties. Payment in lieu of notice includes your full pay and any additional entitlements, such as pension contributions.