If you’re thinking about redundancies, it’s important to understand the costs involved before going ahead with the process. So, to give you an idea of what employees are entitled to, we’ve created our very own redundancy calculator.
Simply fill in the employee’s age on termination, how many complete years’ service they’ve got under their belt and what a basic week’s pay is, and we’ll tell you:
By law, eligible employees are entitled to: half a week’s pay for each full year of service under 22-years-old; one week’s pay for each full year of service between 22 and 41-years-old; and one and a half week’s pay for each full year of service over 41-year-old.
To save you doing the maths, we’ve done the leg work with our easy-to-use calculator:
Statutory maximum week's pay
No. of weeks' pay due
Statutory payment is
Uncapped payment would be
To qualify for redundancy pay, employees must meet the following three requirements:
Employees must be working under a contract of employment – remember, we can help you with these. It’s also worth noting that a contract of employment doesn’t actually have to be in writing to be valid, a verbal contract can suffice.
To be eligible for redundancy pay, employees must have been working for your business for at least two years – continuously.
There are several breaks in service that don’t affect an employee’s redundancy pay entitlement, including breaks:
The third requirement is that the employee must have been dismissed by reason of redundancy, or have requested redundancy and you haven’t challenged their right to redundancy, after being laid off or put on short-time working for either four consecutive weeks, or six non-consecutive weeks in a 13 week period.
The main reason an employee won’t be eligible for redundancy pay is if you offered them suitable alternative work, but they unreasonably refused it.
Valid reasons for refusal could include things like: the location isn’t practical, or the new working pattern doesn’t suit their domestic circumstances.
Only the best 20 years of service count for redundancy pay purposes, so for anyone aged 61 or over the maximum redundancy payment is 30 weeks’ pay.
Employees who are made redundant on or after April 6th 2021 are entitled to a maximum statutory redundancy payment of £16,320 – this is based on 30 weeks’ pay and a weekly cap of £544.
The maximum statutory redundancy pay prior to this date was based on a weekly cap of £538, and so employees made redundant on or before April 5th 2021 will be entitled to less.
When it comes to redundancies, pay isn’t the only area you need to get right. From working out your options and consultations, to notice periods and difficult conversations, there’s a lot to juggle.
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