Redundancy Pay
Redundancy pay is compensation because the job has disappeared. This can be due to:-
- the closure of a business.
- the closure of the employee’s workplace.
- a diminishing need for employees to do the available work.
If an employee is made redundant they are entitled to statutory redundancy pay if they have worked for the employer for at least 2 years. The amount they are entitled to will be based on their weekly pay, age and continuous employment with the employer.
Statutory redundancy pay is also due when a fixed-term contract of 2 years or more expires and is not renewed because of redundancy.
How much pay is due will depend on: –
- How long the employee has worked for the employer.
- Employees age.
- Employees pay.
Payment is calculated:-
- Half a week’s pay for each complete year of employment below the age of 22.
- A full week’s pay for each complete year of employment between the age of 22 and 40.
- 1 and a half week’s pay for each complete year of employment above the age of 41.
There is a maximum payment of 20 years.
Employment is counted up to the date notice runs out.
The Statutory Redundancy Pay is reviewed each February. The new rate with effect from 6th April 2022 is £571 per week or your contracted weekly pay if lower with a maximum of £17130.
If you have cash-flow problems so serious that making the redundancy payment would put the future of your business at serious risk, the Redundancy Payments Service (RPS) can arrange to pay the employee direct from the National Insurance Fund. If you are insolvent, the RPS makes the payment and the debt is recovered from the assets of your business.
Free legal advice for employers is available from Employers Direct.
For more guidance and details on your statutory obligations from the Government website click here.
ACAS also offer free help advice and guidance for employers.
