Welcome to ‘Everything You Need To Know About Redundancy.’ Navigating the complexities of redundancy can be overwhelming, especially when faced with a barrage of unfamiliar terms and processes. That’s why we’ve created this comprehensive guide, ensuring you’re equipped with all the knowledge you need. Dive deep into redundancy terminology and definitions to demystify the jargon, and gain clarity on how to claim statutory redundancy pay. We’ll shed light on the intricacies of redundancy notice and the role of a trade union representative in safeguarding your rights. Discover the legalities surrounding the minimum notice period, and arm yourself with the vital information needed to claim unfair dismissal, if ever you’re faced with such circumstances. And of course, we’ll guide you through the often confusing topic of redundancy money, ensuring you’re clear on entitlements and processes. Let this guide be your roadmap, illuminating each step of the redundancy journey.
The information in this guide is not to be considered legal advice and is just our understanding of employment law. We accept no liability nor accuracy to the below. Always remember to consult your employment contract and consider seeking legal advice if you’re facing redundancy to ensure your rights are upheld.
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I am being made redundant while on maternity leave, how should my redundancy pay be calculated?
- Redundancy terminology and definitions
What Does Your Redundancy Mean?
Redundancy occurs when an employer decides that they no longer need a specific role, or as many employees carrying out that role, often due to organisational changes, business downturns, or financial constraints. Being made redundant isn’t a reflection on your performance or abilities; it’s a business decision based on broader factors. You’ll typically receive notice, consultation, and potential financial compensation, depending on your length of service and contract terms.
How Much Do You Get Paid For Redundancy?
The amount you receive for redundancy depends on your age, your weekly salary, and your length of service with the company. In the UK, statutory redundancy pay is: half a week’s pay for each full year of service while you were under 22, 1 week’s pay for each full year of service between ages 22-40, and 1.5 week’s pay for each full year of service aged 41 or older. However, many employers offer enhanced redundancy packages, so it’s wise to consult your employment contract or speak to your HR department. You can calculate your redundancy pay using this GOV.UK tool.
Can I Be Made Redundant With Less Than 2 Years Service?
Yes, an employer can make you redundant if you’ve been with them for less than 2 years. However, you won’t be entitled to statutory redundancy pay unless you’ve been with the company for at least 2 years.
Redundancy Meaning
Redundancy refers to a situation where an employee's role ceases to exist, often due to organisational changes, economic pressures, or technological advancements. It's important to note that redundancy is about the role, not the individual, meaning it's unrelated to the employee's performance or conduct.
What Is Statutory Pay Redundancy?
Statutory Redundancy Pay is a financial compensation legally owed to eligible employees who are made redundant. It's a mandated amount based on an employee's age, weekly wage, and length of service. This ensures that employees receive some financial support when parting with their employer through no fault of their own.
How Is Redundancy Calculated?
The calculation for redundancy pay hinges on three main factors: age, weekly wage, and tenure with the employer. The UK system provides: 0.5 week's pay for each full year of employment while under 22; 1 week's pay for each full year between ages 22-40; and 1.5 week's pay for each full year aged 41 or older. It's worth noting that there's a cap on weekly pay for the purpose of these calculations.
Who Pays Redundancy?
The onus of paying redundancy falls on the employer. In cases where the employer is insolvent and cannot pay, employees may receive payment from the National Insurance Fund, through the Redundancy Payments Service (RPS).
What Is An Example Of Redundancy?
Redundancy can arise in various scenarios. For instance, if a company decides to automate certain tasks that were previously done manually, the employees performing those tasks might be made redundant. Similarly, if a business branch closes down or merges with another department, roles that become surplus to requirements may lead to redundancies.
What Is A Typical UK Redundancy Package?
A typical UK redundancy package will include statutory redundancy pay based on age, weekly pay, and length of service. Additionally, it might offer a notice period (or pay in lieu of notice), accrued holiday pay, and sometimes, an additional financial incentive or enhanced redundancy pay, depending on the employer’s policies or individual employment contracts.
Do I Pay Tax On Redundancy?
In the UK, the first £30,000 of your redundancy payment is tax-free. Any amount above this threshold is subject to tax. Regular payments, like outstanding wages, holiday pay, or bonuses, will be taxed as usual.
Do All Employees Get Redundancy Pay?
Not all employees are entitled to redundancy pay. Only those who have been with their employer for at least 2 years are eligible for statutory redundancy pay. However, some employment contracts might offer redundancy pay irrespective of service length, so it’s essential to check individual terms.
How Long Does Redundancy Pay Take?
Typically, redundancy pay should be provided on the date your employment ends or your next scheduled payday. If there are delays, it’s vital to communicate with your HR department or seek advice.
What Are Valid Reasons For Redundancy?
Valid reasons for redundancy include a business closing down completely, a specific workplace location shutting down, or a reduced need for employees to perform certain tasks due to restructuring, mergers, or changing business needs. The reasons must be genuine, and the redundancy process should be a fair procedure and transparent.
What Are The 5 Stages Of Redundancy?
The redundancy process generally follows these five stages:
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Planning: The employer identifies the need for redundancies and plans how they will be carried out.
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Consultation: Affected employees, or their representatives, are consulted about the redundancy proposals and alternatives.
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Selection: Employees to be made redundant are chosen based on fair and transparent criteria.
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Notice: Employees are given a notice period based on their length of service, or pay in lieu of notice.
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Payment: Redundancy payments, including any statutory or enhanced pay, are processed.
What Is The Redundancy 3 Month Rule?
The ‘3 month rule’ can relate to one of two situations. The first is collective redundancies. In the UK, if an employer is planning to make 20 or more employees redundant within a 90-day period, they are required to conduct a consultation with the employee representatives, typically a trade union representative or elected employee representatives. The consultation should begin at least 30 days before the first redundancy for 20 to 99 redundancies, and at least 45 days before the first redundancy if 100 or more redundancies are planned.
The second situation occurs if you employer neglects to provide redundancy pay or if the sum is disputed. Here you possess a 3-month window from the end of your employment to lodge a payment claim with an employment tribunal. Even if you miss this deadline, the tribunal retains a further 6 months to determine the appropriateness of a payment.
What Is Voluntary Redundancy?
Voluntary redundancy is when an employer asks employees if they’d like to leave the company in return for a financial package. This is often offered to reduce staff numbers without having to resort to compulsory redundancies. Employees can apply and, if accepted, they receive a redundancy package, often more generous than statutory terms.
Can I Appeal Redundancy?
Yes, if you believe that your selection for redundancy was unfair or the process wasn’t handled correctly, you can appeal against the decision. You should first check your company’s redundancy policy, as it will likely outline the appeal process. If you’re not satisfied with the outcome of the internal appeal, you might consider taking your case to an Employment Tribunal.
Unfair Reasons For Dismissal
Unfair dismissal occurs when an employee is let go without a valid reason or without following a fair dismissal process. Examples of unfair reasons include being dismissed for joining a trade union, whistleblowing, taking maternity or paternity leave, or for raising valid health and safety concerns.
Who Can Get Statutory Redundancy Pay?
Employees who have been with their employer for at least two continuous years are eligible for statutory redundancy pay. This doesn’t include self-employed people, police employees, armed forces personnel, share fishermen, or those who voluntarily take redundancy.
When You Could Lose Your Right To Statutory Redundancy Pay
You could lose your right to statutory redundancy pay if you refuse a suitable alternative job offered by your employer, if you’re dismissed for misconduct before the end of your notice period, or if you resign during the notice period without a good reason.
Does My Employer Have To Give Me An Opportunity To Apply For A New Role First, Before Advertising It Externally?
While there’s no statutory obligation to do so, as part of a fair redundancy process, employers should consider offering suitable alternative vacancies to those facing redundancy before advertising roles externally. If you’re not offered suitable alternative employment for a role you believe you’re suitable for, it may form grounds for an unfair dismissal claim.
What Are My Redundancy Rights After A TUPE Transfer?
Following a TUPE (Transfer of Undertakings, Protection of Employment) transfer, employees’ terms and conditions of employment are protected. This means that if you’re made redundant post-transfer because of the transfer itself, it would likely be deemed an unfair dismissal. However, if the redundancy is due to an economic, technical, or organisational reason involving changes in the workforce, it might be deemed fair.
I Am Being Made Redundant While On Maternity Leave, How Should My Redundancy Pay Be Calculated?
If you’re made redundant while on maternity leave, any redundancy pay should be calculated based on your regular weekly earnings before you went on leave, not on your maternity pay. This ensures that you’re not disadvantaged for taking maternity leave and ensures fair treatment under the law.
How Do I Re-Skill And Pivot Careers?
Redundancy can occur for many reasons. With technological advancements and fast-paced change, more professionals find themselves in a situation where their industry or profession is declining. The employer’s business simply no longer has a market or customer base. This might mean you cannot find the same job with a new employer, and your redundancy is the perfect time to re-skill and pivot careers. You will find it highly beneficial at this stage to read our career advice for different professions and investigate training courses to learn new skills and earn the qualifications employers seek. You can often do this while working in another temporary position, work from home job, or a part-time job if your redundancy payments aren’t sufficient to support you and your family.
As you train, re-skill, and search for opportunities, you should update your resume. You can read our advice on updating your CV and download one of our CV templates, which also includes a redundancy CV template tailored to your situation.
What Salary Can I Earn In Different Careers?
Here, you can explore the highest-paid jobs in the United Kingdom and find the average salary for any job title. You can narrow down your salary search and hone in on potential career paths through the business sectors below:
How Do I Find A New Job?
Finding a new job and new employer can feel like a challenge. We aggregate jobs from the UK’s major job boards to help you find relevant work opportunities. You can search for jobs and refine your job search in the following categories:
Redundancy Terminology And Definitions
If you are facing redundancy, you may be confronted with a myriad of unfamiliar terms. Here we cover all the essential redundancy terminology, providing an explanation and definition for each.
Statutory Redundancy Pay:
Statutory Redundancy Pay is the minimum amount an employer legally owes an employee who's being made redundant, provided they’ve worked for the company for at least two years. The amount depends on the employee's age, weekly wage, and length of service. For help and guidance on wage calculations, read How To Work Out Your Weekly/Hourly Pay and How To Work Out Your Take Home Salary.
Unfair Dismissal:
Unfair Dismissal occurs when an employee is dismissed from their role without a good reason or without a proper procedure being followed, making the dismissal unjust in the eyes of the law.
Employment Tribunal:
An Employment Tribunal is a specialised court in the UK that deals with disputes between employers and employees over employment rights, such as unfair dismissals, discrimination, or wage issues.
Voluntary Redundancy:
Voluntary Redundancy is when an employee chooses to leave their job in exchange for a financial incentive, often offered by the employer to reduce staff numbers without resorting to compulsory redundancies.
Statutory Notice Period:
The Statutory Notice Period is the legally required amount of notice an employer must give an employee before ending their employment, or vice versa. Its length varies based on the employee's duration of service.
Suitable Alternative Employment:
This refers to a different job role offered by an employer to an employee who's at risk of redundancy. The role should be on similar terms and conditions, and it should be reasonable for the employee to accept it.
Contractual Redundancy Pay:
Beyond the statutory amount, Contractual Redundancy Pay is an enhanced sum agreed upon in the employee's contract or as part of an employer's own redundancy policy.
Employee Representative:
An Employee Representative acts on behalf of employees, representing their interests, especially during consultation processes in redundancy situations or in negotiations with employers.
Enhanced Redundancy Pay:
This is a sum that goes beyond the statutory redundancy payment. It's often based on an employer's specific policy or an individual's employment contract and is typically more generous.
Collective Redundancy:
Collective Redundancy arises when a large number of employees are made redundant by their employer within a 90-day period, triggering specific consultation and notification requirements.
Length Of Service:
This term refers to the total duration an individual has been employed by a particular employer. It can impact various entitlements like redundancy pay or notice periods.
Settlement Agreement:
A Settlement Agreement is a legally binding contract that waives an individual's rights to make a claim covered by the agreement to an employment tribunal or court. In exchange, they often receive a financial compensation.
Consultation Process:
In the context of redundancy, the Consultation Process is a series of formal discussions between employers and employees or their representatives. Its aim is to consider ways to avoid or minimise redundancies and mitigate their effects.
Lieu Of Notice:
‘In lieu of notice’ means that instead of serving their notice period, an employee receives a payment equivalent to what they would have earned during that time.
Fixed Term Contract:
This is a type of employment agreement where the employment is set to last for a specific duration, ending on a particular date or upon completion of a specific task.
Gross Misconduct:
Gross Misconduct refers to severe inappropriate behaviour or negligence by an employee that justifies instant dismissal without notice or pay in lieu of notice.
Temporary Lay-Off:
This is a short-term solution where employees might not work or receive full pay for a period due to a lack of work or economic difficulties, but they remain employed.
Redundancy Pay FAQs
Here we answer the frequently asked questions of employees who face redundancy, employers making redundancies, and HR professionals calculating redundancy payments.
WHAT AM I ENTITLED TO IF I AM MADE REDUNDANT?
If you’re made redundant, you may be entitled to statutory redundancy pay if you’ve been with your employer for 2 years or more. The amount you’ll receive is based on your age, weekly pay, and the number of years you’ve been in the job. You should also receive notice, a consultation with your employer, and the option to move into a different job or be given time off to find a new role.
WHAT ARE GENUINE GROUNDS FOR REDUNDANCY?
Genuine grounds for redundancy typically include the closure of a business, closure of your workplace, or a reduced need for employees to do certain work. It’s essential that employers use a fair and objective way of selecting employees for redundancy.
IS BEING MADE REDUNDANT THE SAME AS BEING SACKED?
No, being made redundant is not the same as being sacked. Redundancy is a form of dismissal from your job due to reasons beyond your control, like business changes. In contrast, being sacked often relates to issues regarding your performance, conduct, or breach of contract.
WHAT DOES MY EMPLOYER HAVE TO DO IN REDUNDANCY PROCEEDINGS?
In redundancy proceedings, your employer must hold a consultation to discuss the reasons for redundancy and consider any alternatives. They should also give you a notice period, offer suitable alternative employment where possible, and provide redundancy pay if you qualify.
WHEN DOES REDUNDANCY COUNT AS UNFAIR DISMISSAL?
Redundancy may count as unfair dismissal if the real reason for letting you go isn’t genuine redundancy, if your employer doesn’t follow a fair redundancy process, or if you’re chosen for redundancy based on discriminatory reasons or because of any trade union activities.
WHAT ARE MY REDUNDANCY RIGHTS WHEN I AM SICK?
If you’re off sick, you still have the same redundancy rights as other employees. This includes receiving redundancy pay, a notice period, and consultation. Being on sick leave doesn’t make you exempt from redundancy, but you mustn’t be selected for redundancy just because you’re on sick leave.