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Employee redundancy entitlements

The information below will help you work out exactly what you are entitled to if you are being made redundant and your employment is ending. In all cases, you should be paid any outstanding wages and holiday days you are owed. Your redundancy and notice entitlements may be defined in your individual employment contract. However, where that is not the case, use the information below to work out what you are entitled to, according to statutory law.
If your employer is making you redundant due to the company’s insolvency, the company has certain legal duties and obligations to you. This guide will clearly outline what the company is legally and financially obliged to offer you during this time, and what will happen if the company unable to meet its obligations to you.

Notice Periods

All employees are entitled to a notice period if their employment is ending. In some cases, the notice period will be defined in your individual contract of employment. However, where this is not the case, the statutory minimum notice period, or minimum legal notice period the company has to give you, are as follows:

If you have worked for the company between one month and 2 full years, you will be entitled to 1 week’s paid statutory notice
If you have given 2 full years’ service, you will be entitled to a 2 week paid statutory notice period.

If you have given more than 2 years, but less than 3 years, the statutory notice period requirement will remain at 2 weeks.

For every full year of service that you have given the company after 2 full years, you are entitled to a week’s paid notice period for each full year of service given up to a maximum of 12 week’s paid notice.

For example, if you have given 5.5 years’ service, you are entitled to 5 weeks paid notice.

If you have given 15 years full service, you are entitled to 12 weeks paid notice.

Payment in lieu of notice

Employees can be paid in lieu of a paid notice period. Where this is not specifically defined in your original contract of employment, the statutory minimum periods as above will apply.

Time off for job-hunting

If you are working your notice period, and you’ve been employed by the company for two full years or more, you are entitled to reasonable time off to look for new employment during your notice period. During such times, your employer is not obliged to pay you full pay. Legally, if you take time off for job-hunting during your notice period, your employer is only obliged to pay 40% of a full week’s pay. E.g for an employee normally working 5 days a week, who takes 4 days over the notice period to jobhunt and attend interviews, they will be paid for 2 days out of the 5. In terms of how much time off is reasonable time, some employers may seek to offer the time equivalent of 40% of a full week’s wage as time off to look for new employment. 

Unpaid Wages and Holiday Pay

All employees should receive any outstanding wages and holiday pay they are owed when their employment is terminated. 

Redundancy Pay

If you have been employed by the company for 2 full years or more, you will also entitled to redundancy pay. Your redundancy entitlements may be defined in your original contract of employment, or alternatively, the statutory minimum entitlements for redundancy are as follows:

For every full year of service that you are 41 or over, you are entitled to 1.5 weeks redundancy pay for each full year. 

For example,

If you worked 2 full years aged 41 or over, you’ll receive 3 weeks redundancy for those two years.

If you worked 10 full years aged 41 or over, you’ll receive 15 weeks redundancy for those 10 years

For each full that you are 22 or over, but under 41, you are entitled to 1 week’s redundancy pay for each full year of service. 

For example,

If you worked 2 full years aged 22 or over but less than 41, you’ll receive 2 weeks redundancy pay for those two years

If you worked 8 full years aged 22 or over but less than 41 for all those years, you’ll receive 8 weeks redundancy for those 8 years

For each full year you worked that you were under 22, you are entitled to 0.5 weeks redundancy pay for year of service.

For example, if you worked 2 full years, you’ll receive 1 week’s redundancy pay.

How to calculate statutory redundancy entitlements

Your redundancy payment is calculated in terms of weeks, so you’ll need a weekly salary figure. If your weekly hours vary, work out your weekly pay rate using an average of the previous 12 weeks’ pay. If your salary is determined on an annual basis, your weekly pay will be calculated from the gross annual figure. 

If the company cannot meet its financial obligations towards employees being made redundant

If the company is insolvent and cannot meet its financial obligations to you as above, once the company enters a formal insolvency procedure, you will be able to make a claim to the National Insurance Fund for your outstanding employment entitlements (up to the statutory limits as below), via the Redundancy Payments Service.

Where owed, you will be able to claim for:

  • Redundancy pay – subject to the statutory minimum entitlements above. A maximum weekly pay limit of £508 in tax year ending 5th April 2019 will be considered, and a maximum of 30 weeks paid
  • Notice Pay – subject to the statutory minimum above. If you have worked your notice period but the company has been unable to pay you; if you weren’t given any notice; or, if you were paid until the end of employment but didn’t work your full notice period, you will be entitled to claim for loss of your statutory notice entitlement.  Any payments made will be subject to a maximum weekly pay limitation of £508 per week for 18/19 tax year, and a maximum pay period of 12 weeks
  • Unpaid Wages – up to a maximum of 8 weeks, and maximum weekly pay of £508 for 18/19 tax year
  • Outstanding holiday days – up to a maximum of 6 weeks, and maximum weekly pay of £508 for 18/19 tax year

Deductions at source

  • Redundancy payments are not subject to any tax or NI deductions at source.
  • Holiday pay and unpaid wages are subject to national insurance deductions at source and tax deductions at 20% rate at source.
  • Notice pay will also be subject to tax deductions at source at 20% rate, and deductions will also be made for jobseekers allowance, regardless of whether it has been claimed or not.

Collective Consultation

If the company employs more than 20 people and intends to make 20 or more people redundant within a 90-day period, it must follow collective consultation rules. You can find more information regarding collective consultation on the government’s website here. There is no limit on how long collective consultations should last, however, employees cannot be dismissed without a minimum of 30 days consultation if the company plans to make between 20 and 99 redundancies, or 45 days if more than 100 redundancies.

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