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Redundancy pay entitlement

If you are facing redundancy at work, it is important to know what you are entitled to. Your redundancy pay entitlement will depend on a number of factors, which include:

  • What your employment contract states
  • How long you have worked for your employer
  • Your age

If I’m made redundant what am I entitled to?

We always recommend checking your employment contract to see if you are entitled to enhanced redundancy payments. If you are not entitled to enhanced redundancy payments, then you will be entitled to statutory redundancy pay. How this is worked out is based on your length of service and your age, these payments are currently capped at £15,750.

  • Aged under 22 – your employer only has to give you half a week’s pay for each full year you’ve worked for your employer
  • Aged between 22-40 – you are entitled to one week's pay for each full year of service after you have reached the age of 22. If you worked for your employer when you were aged 22 or under, you will only receive half a week's pay for each full year of that time. For example, if you worked for your employer from the age of 21-24 you will receive half a week's pay and two weeks of full pay 
  • Aged 41 or over, - you will receive 1.5 week's pay for each full year you have worked, once you reached this age bracket. If you worked for your employer when you were aged between 22-40, you will only get one week’s pay for those full years of service

An independent public body called ACAS, who offer impartial advice to both employee and employers, state that redundancy pay should be worked out on the following basis:

  • Your gross earning (before tax)
  • Your age
  • How long you have worked for your employer

For more information on ACAS redundancy pay, go to the ACAS website.

 

Redundancy notice pay

If you are made redundant, you will be entitled to, at the very least, (as long as you have worked there for a month) one week's notice period. How long your notice period is will depend on either what is written in your contact or how long you have worked for the company. The legal minimum notice period is as follows:

  • One month - two years of employment - one week’s notice
  • Two years - 11 full years of employment - one weeks’ notice for every full year you have worked
  • 12 years or more - 12 weeks’ notice

Generally, it is up to your employer if they want you to work your notice; however, if they don't wish you to, then this can pan out in two different ways:

Payment in lieu of notice

This is when you are given a lump sum for your notice period and your employment is terminated straightaway. Also known as PILON, this option may mean, subject to post-termination restrictions, that you may be able to start a new job straight away.

Garden leave

If your employer offers you garden leave, also called gardening leave, then you generally won’t have to come into work, but you are still considered an employee of the company and must adhere to all of your contractual obligations. This means you can’t start a new job until your garden leave comes to an end. You can, however, look for and secure a new role. Depending on your contract or settlement agreement, you may be subject to restrictive covenants, that put restrictions on who you can work for, for a set period of time. 

Settlement agreements

Depending on the reasons behind the redundancy, you may be offered a settlement agreement. This could mean you are offered more than the statutory minimum. Any compensation payments offered in such an agreement will only be subject to tax if the total amount is over £30,000. Before signing a settlement agreement for redundancy, you will need to seek legal advice from a qualified solicitor or an authorised representative of a trade union for it to be legally binding. Read our guide to settlement agreements here.

If you need legal advice on whether you are receiving a fair redundancy package or if you think your redundancy was unfair, then contact our experienced redundancy solicitors today on 0161 696 6170.

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