So just how much is redundancy pay?

February 11, 2007 8:39 am Published by

‘Redundancy’ can be a dreaded word, to employers as well as their employees. All the more so when it is involuntary, perhaps with a downturn in business meaning that people have to be laid off. Subject to the right procedures being followed, with fair consultation and consideration of whether there is suitable alternative work to be offered, dismissal for redundancy is allowed and often little can be done about it.

The law does sugar the pill a little, by providing for a statutory redundancy payment provided the employee has been there for at least two years. However this is not the mega bucks that employees often think it will be and that can be a cruel disappointment to swallow. So how much does have to be paid to a redundant employee?

If there is no higher amount given by the contract of employment or under an agreement with the employer, then only the statutory redundancy is payable. In summary, this is usually one week of pay (capped at £330 per week) for each complete year worked (capped at twenty years), with .5 as the multiplier for each year under age 22 and 1.5 weeks for every year over age 41. For example if a 40 year old has worked for an employer for 10 years and earns 30k, they get statutory redundancy of £3,300. If a 60 year old works for 5 years and earns 16k, they get £2,308. The maximum possible is under £10,000, needing at least 20 years service by someone 61 years plus.

A useful calculator of redundancy pay is at www.berr.gov.uk/ Employment matters/ Redundancy/ The Redundancy ready reckoner is on the right. This is in addition to rights to paid notice and for accrued holiday.

More people will be doing the calculation. The CIPD/KPMG Labour Market Outlook winter survey recently reported a rise of 17% on autumn figures for employers contemplating redundancies. A survey of 1,553 employers shows that 38 per cent intend to make some employees redundant this quarter. Figures are always higher in the winter, but they are up a little on last year. And of course statistics are irrelevant when you are personally involved in a redundancy situation. You may wish to take advice to ensure that all requirements are met and dues paid. Then for employees, it’s on to the next job, hopefully before all the redundancy money has run out!

Frances Barker is employment partner at Blocks Employment Service.
Contact her at Blocks Solicitors on tel. 01473 343905 or frb@blockslegal.co.uk
The above is general comment only and individual advice should be taken.

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