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Statutory redundancy payment

If you are looking for general information on redundancies, please take a look here.

What is a statutory redundancy payment?

A statutory redundancy payment is compensation paid by an employer to an employee because an employee’s job has disappeared due to redundancy.  There are two types of redundancy pay:

  • A statutory redundancy payment, which is set down by law (and discussed in more detail below); and
  • A contractual redundancy payment, which an employee may receive if there is a contractual redundancy scheme in place in the workplace.  If there is a scheme of this nature it will probably be detailed in the employee’s employment contract or in the redundancy policy in the handbook (if there is one).

Statutory redundancy payments: the detail

A statutory redundancy payment is usually payable to an employee with two years’ continuous employment  who is made redundant or becomes eligible for a redundancy payment because they have been laid off or kept on short-time working.

The payment is calculated by use of a formula based on the employee’s age, length of service and week’s pay.  A “week’s pay” is capped at £450.00. The employee’s gross salary is used, not the net salary.

An employee is entitled to the following payments:

  • Half a week’s pay for each full year employed under 22;
  • 1 week’s pay for each full year employed between the age of 22 and 41;
  • 1 and half week’s pay for each full year employed over 41 years old or over.

Losing the right to a statutory redundancy payment

An employee may lose the right to a statutory redundancy payment if:

  • An employer offers to keep an employee on and offers the employees “suitable alternative work”;
  • An employee wishes to leave before the date their employment is due to end, for example if they find another job.

Exceptions

An employee is not entitled to a statutory redundancy payment if they fall into one or more of the following categories:

  • Merchant seamen, former registered dock workers (covered by other arrangements) or 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.

In many cases the question of entitlement to and the calculation of a statutory redundancy payment are straightforward.  However sometimes questions arise in relation to an individual’s employment status.  This area can be quite tricky, most people in work are employees, but if an individual is self- employed or a casual worker they are unlikely to be held as an employee and therefore they will not be entitled to a statutory redundancy payment.  On the flip side of this some agency workers and freelance workers count as employees.  If an individual’s status does allow them to claim a statutory redundancy payment the question then remains as to whether the individual has the required length of service.  If you are in any doubt then feel free to give us a call.  Our employment lawyers have years of experience in advising on redundancy situations and statutory redundancy payments.

Can I claim a statutory redundancy payment when I have been temporarily laid off?

Employees can claim a Statutory redundancy payment if they have been temporarily laid off (without pay or less than a week’s pay) for either:

  • More than 4 weeks in a row;
  • More than 6 non-consecutive weeks in a 13 week period.

There is a strict procedure that must be followed in relation to the above.  An employee must write to their employee within 4 weeks of their last non-working day in the 4 or 6 week period.  If you have been temporarily laid off work and require assistance about your rights in respect of a statutory redundancy payment please contact us so that we can assist as this is a complex area of law.

For business law advice call 0845 225 2635

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