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Redundancy pay

  • Find out your redundancy entitlement 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 afterwards, and generally make strenuous efforts to ensure that the damaging impact for you and your family is minimised. Some behave like amoral cretins. We're afraid it really is a bit of a lottery.
  • The place you really need to go to find out the basics is the Dept for Business Enterprise website listed below.
  • 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.
  • It might even be 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.


Useful resources

Department for Business Enterprise & Regulatory Reform (BERR) - Redundancy
Department for Business Enterprise & Regulatory Reform (BERR) - Redundancy
The official Government source of policy, legislation and procedures relating to employee redundancy.
files/graphics/filetypes/pdf HMRC redundancy-factsheet.pdf - 152kb
Download this HMRC redundancy fact sheet
Google