Dismissal – Calculating Redundancy Pay

Last Updated
July 20, 2010

Any employee who has worked for you for at least two years is ent itl ed to redundancy pay if you make them redundant. Redundancy pay is also due when a fixed-term contract of two years or more expires and is not renewed because of redundancy.

Earnings

  • How much redundancy pay an employee gets depends on how much they earn each week up to a certain limit
  • The current maximum is £380.

Continuous service

  • How much redundancy pay an employee gets depends on how long they have worked at your company.
  • To be entitled to redundancy pay, continuous service must be at least two years.
  • The maximum number of years of continuous service that can be counted towards redundancy pay is 20. The 20 years of continuous service are counted backwards from the time of redundancy.

Age

  • How much redundancy pay an employee gets depends on how old they are.
  • An employee’s age is relevant to calculating how much money they get.
  • An employee’s age is not relevant to whether or not they are entitled – there are no lower or upper age limits on redundancy.

Each employee earns a percentage of their week’ s earning s for each full year of service they have worked. The percentage they get for each year depends on their age at the time they worked it. An employee gets 0.5 week’s pay

  • For each full year of service they worked under the age of 22

An employee gets 1 week’s pay

  • For each full year of service they worked between the ages of 22 and 40

An employee gets 1.5 week’s pay

  • For each full year of service they worked over the age of 41

Calculation examples

Joanne

  • Age: 45
  • Weekly earnings: £420
  • Service: 10 years
  • NOTE: Only £380 of her £420 weekly salary count

£380 x 1 x 5 = £1,900 (Service accrued aged 35-40) £380 x 1.5 x 5 = £2,850 (Service accrued aged 41-45) Total redundancy pay = £4,750 Christopher

  • Age: 50
  • Weekly earnings: £250
  • Service: 30 years
  • NOTE: Only 20 years of his 30-year service count

£250 x 1 x 10 = £2,500 (Service accrued aged 30-40) £250 x 1.5 x 10 = £3,750 (Service accrued aged 41-50) Total redundancy pay = £6,250

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