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Redundancy pay
When you find out that redundancy is on the cards it is important to know about the rules that apply regarding redundancy pay. Provided that you qualify for redundancy pay, it falls into two basic categories - statutory redundancy pay i.e. what the law says you are entitled to as a minimum, and non statutory redundancy pay which is entirely at the discretion of your employer i.e. whatever else they choose to offer to you. - Some people do pretty well out it, pocket a nice redundancy lump sum and walk straight into another well paid job. Many others don't.
- Some employers offer outplacement packages, allow the use of cars or other perks for a while after you have left the organisation, and generally make strenuous efforts to ensure that the damaging impact for you and your family is minimised. Some behave less decently. It really can be a bit of a lottery.
- To find out the basics the Directgov website listed below is currently the official source of information on employment matters including redundancy.
- You may be a member of a Trade Union and have a rep who can advise you, or your HR representative should be able to share the company's policy with you.
- An outline of rights in relation to redundancy might be found in your employee handbook or contract of employment if you can remember where they are.
When is a redundancy payment due?
Broadly speaking, your employer must give you a lump-sum payment if you:
1. Are made redundant
2. Have at least two years' continuous service since the age of 18 (service before the age of 18 does not count for these purposes)
3. Meet the other conditions set out in the Deprtment for Business Enterprise website.
How much might I get?
Currently the maximum for statutory redundancy pay is 30 weeks pay or £9,300. Many companies will pay more than this, however, you can calculate your statutory entitlement here.
Do I pay tax on it?
The first £30,000 is currently free of tax. Any residue is taxed at the normal prevailing rates. You can download an HRMC factsheet at the bottom of this page.
Will it affect my benefits claims?
Yes, that's what the redundancy payment is there for - to tide you over until you generate another income for yourself. Check out our claiming benefit page to see how that works.
What if my employer has gone bust?
Workers who lose their jobs when their firm falls into administration are advised to contact two different government bodies - the Redundancy Payments Office and HM Revenue & Customs. The Redundancy Payments Office, part of the Insolvency Service, handles claims from workers for unpaid wages, and redundancy money.
Specifically it deals with:
- Redundancy pay
- Wages - up to a maximum of eight weeks
- Holiday pay - up to a maximum of six weeks
- Notice pay - one weeks pay for each year of service, up to twelve weeks
Holiday pay and wages are calculated from the date of insolvency. Redundancy and notice pay are worked out from either the date the employer become insolvent, or when an employee loses their job, whichever is later. You can find out more by going to the websites we've listed below.
Useful resources
 | HMRC redundancy-factsheet.pdf - 152kb Download this HMRC redundancy fact sheet |
| The Insolvency Service Redundancy Claim Form.pdf - 99kb Download this file here |
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