How Much Is Redundancy Pay UK?

When considering making redundancies, its crucial to understand the intricacies of redundancy pay. Employees often ask, ‘How much is redundancy pay UK?’ As an employer, having a clear understanding of your obligations regarding redundancy pay not only equips you to provide accurate information to your employees, but also ensures you fulfil your legal obligations.

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When Do You Have To Pay Redundancy In The UK?

In the UK, there are two distinct types of redundancy pay, known as statutory and contractual.

You must pay statutory redundancy pay to anyone who has worked for you continuously as an employee for at least two years. Employees work for you under an employment contract. A worker is probably an employee for redundancy purposes if most of the following apply to them:

  • They are required to work regularly unless they’re on leave, such as on holiday or off sick.
  • They are required to work a minimum number of hours and expect payment in return.
  • They are managed or supervised by someone who tells them how a piece of work should be done and by when.
  • They cannot send somebody else to do their job instead of them.
  • They are entitled to paid holiday.
  • They are entitled to statutory sick pay as well as maternity or paternity pay.
  • They are entitled to join your organisation’s pension scheme.
  • They are subject to your organisation’s disciplinary and grievance procedures.
  • They perform their role at your business premises or another address specified by you.
  • Their contact contains redundancy procedures.
  • Your organisation provides the equipment they need to do their job.
  • They only work for their business. If they do have another job, it is entirely different to their role in your organisation.
  • Their documentation, including their contract of employment, refers to them as the ‘employee’ and your organisation as the ‘employer’.

Contractual redundancy pay is an amount over and above statutory redundancy pay that your organisation has agreed to pay to the employee. Your obligations may be set out in the employee’s contract of employment or your employee handbook or policies. Crucially, however, an obligation to pay enhanced redundancy can sometimes be implied from your previous conduct. If you routinely pay enhanced redundancy when dismissing employees, an employee may argue that you are obliged to do the same for them. Arguments of this nature have been upheld by the Employment Tribunal in some cases. Accordingly, you must exercise caution when enhancing employee redundancy pay to avoid inadvertently setting a precedent that you are bound to follow in the future.

How Much Is Redundancy Pay UK?

Statutory Redundancy Pay

Statutory redundancy pay is the legal minimum you have to pay an employee selected for redundancy. It is calculated in accordance with the employee’s age, length of service, and weekly pay, as follows:

  • Employees aged under 22 – half a week’s pay is required for each full year of service.
  • Employees aged 22-40 – a full week’s pay is required for each complete year of service.
  • Employees aged 41 and over – one and a half week’s pay is required for each complete year of service.

Statutory redundancy pay is capped at 20 years and £700 a week at the time of writing, regardless of the employee’s actual weekly wage and length of service. Accordingly, the maximum statutory redundancy pay is £21,000. The maximum weekly pay amount is reviewed periodically.

Contractual Redundancy Pay

You can choose how much enhanced redundancy to pay. Some employers choose to dispense with the need for an employee to have two years of continuous service and pay redundancy to any employee dismissed on redundancy grounds. Others increase the number of weeks’ wages they use for the redundancy calculation. Whatever policy you adopt, you must adhere to it.

What Happens If You Do Not Make The Correct Redundancy Payment UK?

If you do not pay your employees the correct redundancy, they can issue employment tribunal proceedings against you to recover it. To recover statutory redundancy pay, the employee has to issue their claim within six months of their employment ending. To recover contractual redundancy pay, the employee must issue proceedings within three months from the date their employment with you ended.

Call us now on 01491 598 600 or email us on  cw@gaphr.co.uk and we will be delighted to help you.

How Much Is Redundancy Pay UK?

 

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