 Redundancy Pay
An employee is entitled to redundancy pay if they are over 18 and have worked for you for at least two years continuous service. Redundancy pay entitlement is worked out based upon the employee’s weekly wage (If the wage varies from week to week, then an average figure is used.), with the maximum figure being £260 per week. An overview of the method for working out required payments is as follows:
For every year of service between the ages of 18-21 the employee receives half a weeks pay.
For every year of service between the ages of 22-40 the employee receives one weeks pay.
For every year of service between the ages of 41-65 the employee receives one and a half weeks pay.
(Between the ages of 64-65 the amount of required redundancy payment reduces each month.)
The maximum number of years of continuous service that can be counted towards redundancy pay is 20, counting backwards from the time of redundancy.
For example:
1. A 45 year old with 10 years service at a pay of £200 would receive the following:
£200 x 1 x 5 = £1000 (Service between the ages of 35-40)
£200 x 1.5 x 5 = £1500 (Service between the ages of 41-45)
Total redundancy pay = £2500
2. A 50 year old with 30 years service at a pay of £250 would receive the following:
£250 x 1 x 10 = £2500 (Service between the ages of 30-40)
£250 x 1.5 x 10 = £3750 (Service between the ages of 41-50)
Total redundancy pay = £6250
(The first 10 years of service are discounted in accordance with the redundancy payment limit of 20 years service.)
Remember
Dismissal should never be instant, allow the employee to have their say, and follow company or standard warning procedures to minimise the risk of unfair dismissal claims.
In serious cases, suspend the employee rather than dismissing them, that way, if the allegations are false, there is much less risk of (and basis for) the employee claiming against you.
Redundancies must only occur when a job no longer exists. If a vacancy appears for the job, it is not redundancy.
Offering voluntary redundancies may cost more, but will minimise damage to employee morale.
Always give at least the minimum amount of notice as required by law or employee contract (whichever is greater).
You should always do detailed reading of applicable laws and guidelines before making any decisions on redundancy or dismissal.
Further information:
Article Index 4. Calculating Redundancy Pay |
