Facing redundancy can be tough, but it’s important to know your rights, your situation, and your next steps.
If you’re made redundant, you might be eligible for pay.
Redundancy packages aren’t fixed. They depend on factors like the company, industry, your role, your seniority, and how long you’ve been in the job.
Remember, redundancy is negotiable. Don’t feel like you have to accept the first offer you get.
This is a quick guide to redundancy pay, which will help you understand your situation and carefully consider your options.
What Is Redundancy Pay, and Are You Eligible for It?
There are two types of redundancy pay: statutory & contractual.
Statutory redundancy is the legal minimum your employer must pay if you’ve been with the company for at least two years and there’s a real need to make your role redundant.
Contractual redundancy applies if you have a fixed-term contract of two years or more and your employer decides not to renew it. You’re also entitled to this if you’ve had a series of shorter contracts that add up to two years or more.
However, there are situations where you might lose your right to redundancy pay, even if you meet the criteria. For example, if you turn down a suitable job, your employer offers it without a valid reason, or if you find another job before your current role ends, you could lose your entitlement. Similarly, if you’re fired, you may not be entitled to redundancy pay.
As mentioned, you need to have worked for at least two years to qualify for pay, but there are other situations where you won’t be entitled to it. These include if you’re self-employed, a police officer, a member of the armed forces, a parliamentary employee, a Crown servant, or hold a public office. If you work as a domestic worker for your family or for a foreign government, you also won’t be eligible.
How Does Redundancy Pay Work?
Redundancy pay should be processed the same way as your regular pay—typically paid directly into your bank account. You should also receive a written statement that explains how your redundancy payment was calculated.
If your redundancy pay isn’t paid or is incorrect, there are steps you can take.
Start by writing to your former employer, clearly stating what you believe you’re owed and including any supporting evidence if you have it.
If this doesn’t resolve the issue, you can reach out to Acas (the Advisory, Conciliation, and Arbitration Service) for independent guidance. They can help find out if the issue can be settled without needing a tribunal.
If all else fails, you might have to take your employer to a tribunal, but this should be considered a last resort due to the potential stress and costs involved. Before taking that step, it’s worth having a conversation with your local Citizens Advice for further support.
How Much Will You Receive in Redundancy Pay?
When you’re made redundant, the amount of redundancy pay you receive depends on your pre-tax earnings (your gross pay) and your age.
Here’s a breakdown of how Severance pay is calculated based on your age:
- Under 22: You’ll get half a week’s pay for each full year you’ve worked.
- Ages 22 to 40: You’ll receive one week’s pay for each full year of employment.
- Over 41: You’ll receive one and a half week’s pay for each full year of employment.
There are some important limits to be aware of. First, the first £30,000 of statutory redundancy pay is tax-free. However, your redundancy pay is capped at £544 per week, and you can only be paid for up to 20 years of service. For example, if you’ve worked for 25 years, only the first 20 years will count toward your redundancy pay.
To get a more accurate estimate of what you could receive based on your situation, you can use the redundancy pay calculator on GOV.UK.
When Will You Receive Your Redundancy Pay?
Your employer should pay you your redundancy payment either on your last day of work or on a date that you both agree on shortly after.
If there’s a delay or you don’t receive your payment as expected, you can either contact your employer directly or reach out to Acas for further help, as we mentioned earlier.
Who Pays Redundancy if a Business Closes?
If your employer goes out of business, don’t worry—you’re still entitled to your statutory redundancy pay and any unpaid holiday pay. The difference is that, in this case, you’ll need to claim from the Insolvency Service instead of your employer.
For this to happen, your employer must be unable to pay due to insolvency. To get started, you’ll need to obtain a case reference number from the Insolvency Service. Once you have that, you can file your claim online via GOV.UK.
Getting Expert Advice from Cangaf Ltd.
If you’re facing redundancy or are concerned about it, having the right knowledge is crucial. Like any major life event or decision, it’s important to seek expert advice so you fully understand your rights and options.
Remember, redundancy pay is based on several factors, and, importantly, it’s negotiable. For reliable, regulated guidance on planning for your financial future, Cangaf Ltd. offers experienced independent financial advisors across the UK.
GOV.UK: Calculate Your Statutory Redundancy pay
This official government page offers a calculator to determine your statutory redundancy pay based on age, weekly pay, and years of service.
GOV.UK: Redundancy: Your Rights
This guide outlines your rights during redundancy, including eligibility criteria, notice periods, and the calculation of redundancy pay.
Citizens Advice: Check How Much Redundancy Pay You Can Get
This resource explains how redundancy pay is calculated, tax implications, and what to do if your employer doesn’t pay.
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