Redundancy

If your employer is going to make you redundant, there are certain rules and laws that they have to follow. You could be entitled to a redundancy payment so it is important that you know what your rights are. If redundancy will lead to financial hardship, it is essential you take debt advice immediately.

What is redundancy?

Redundancy is a non-fault dismissal if your employer has to reduce the number of employees. Reasons for this could include:

  • Cost cutting requires the number of staff to be slashed
  • The business is permanently shutting down
  • Business changes mean the job you were hired for is no longer needed
  • Technology advances have made your job obsolete

Collective redundancies

If an employer makes 20+ employees redundant within 90 days, this is known as a collective redundancy.

If an employer is considering collective redundancies, they are legally required to consult with a representative of the affected employees. This would typically be their trade union official, but if there is no trade union the employees can nominate representatives of their own choice.

If an employer does not consult the representatives then an Employment Tribunal could grant a claim of a protective award. This would be a maximum of 90 days pay to every affected employee.

Individual redundancies

If an employer is going to make less than 20 people redundant, there is several rules they are required to follow:

  • All employees should be consulted about the redundancy
  • They should consider any suitable alternatives to redundancy
  • They should redeploy affected employees where possible
  • Employees made redundant should be selected fairly
  • They should give notice of redundancies and pay the correct amount of redundancy pay.

If an employer attempts to use redundancies to disguise the real reason for terminating your employment, then they are breaking the law. This could lead to an unfair dismissal claim, which would be separated from any redundancy claims.

Calculating redundancy payments

The amount of redundancy pay you are entitled to will depend on your salary, the amount of time you have been employed and your age.

Contractual redundancy pay

If you are being made redundant you should first check your employment contract as many employers offer redundancy packages greater than the legal minimums.

An employer would be breaking the law if your employment contract offered less than the statutory minimum for redundancy payments.

Statutory redundancy pay

The amount of statutory redundancy pay you are due will vary, depending on:

  • Your current age
  • Your current weekly wage (up to a £380 limit)
  • How long you have been employed

Your statutory redundancy pay will consist of:

  • 1.5 weeks pay for every full year of employment where you were aged 41+
  • 1 weeks pay for every full year of employment where you were aged older than 22, but under 41
  • 0.5 weeks pay for every full year of employment where you were aged under 22.

Tax on redundancy payments

If your redundancy payment is under £30,000 then this would be paid tax-free. IF you are given pay in lieu of notice, you should contact HM Revenue and Customs for advice on how much tax you should be paying.