What Is the Minimum Redundancy Pay? (Know Your Rights)

Check your potential redundancy pay

Statutory redundancy pay is calculated according to your length of service and your age. For example, if you’ve been working for 10 years and are 55 years old, you’ll receive £2,500 per month. If you’re under 25 years old, you won’t qualify for it.

Contractual redundancy pay is usually agreed upon during negotiations between employers and employees. This type of pay is calculated differently depending on whether you work full or part time. Full-time workers are paid less than those who work part time, and there are different rates for people over 40.

There’s a difference between statutory redundancy pay and contractual redundancy pay. You might think that statutory redundancy pay is always better because it’s guaranteed. However, contractual redundancy pay allows you to negotiate with your employer about what you want to receive.

Who can get statutory redundancy pay

Statutory redundancy pay is paid out to employees who lose their jobs due to circumstances outside their control. This includes redundancy payments for workers who are made redundant because their employer goes bust. However, it doesn’t include redundancies caused by industrial action or redundancy agreements.

If you’re self-employed, you won’t receive statutory redundancy pay. Instead, you’ll receive either income protection insurance or personal accident cover. You can also apply for statutory redundancy pay if you work part-time or do some freelance work.

Employees can claim statutory redundancy pay regardless of how long they’ve been working for their current employer. They must have had continuous employment for six months prior to being made redundant.

You can make a claim for statutory redundancy pay up to 12 weeks after you’ve lost your job. Your employer must notify the government within 14 days of making you redundant.

If you’re on a fixed-term contract

Fixed term contracts are used to make sure employees stick around long enough to complete projects. But what happens if the employee decides to leave? If you’ve signed up for a fixed term contract, you’ll receive statutory redundancy pay. This is money given to employees who resign or are fired without notice.

However, fixed term contracts aren’t necessarily permanent. They can be cancelled if the employer wants to rehire the employee later. So it makes sense to negotiate a flexible contract before you sign anything. You might find that you prefer working under a fixed term contract because you like being tied down to one project. However, you could end up regretting it once you realise how much easier it is to change jobs.

Who is ineligible for statutory redundancy pay?

Statutory redundancy pay is payable to workers whose employers go bust. But it applies to fewer people than you might think. Here are some things you need to know about statutory redundancy pay.

1. How much does it cost?

The amount depends on how long you’ve been employed and what type of employment relationship you had. If you worked for a fixed term contract, you’ll receive less than someone working under a permanent contract. And if you work for a limited company, you’ll get less than someone working for a large company.

2. Who gets it?

You could be entitled to statutory redundancy pay if you lost your job because your employer went into liquidation, closed down, merged with another organisation or ceased trading. You don’t need to prove that you weren’t responsible for the failure of the firm – just that you didn’t cause it yourself.

3. What happens next?

If you’re owed money, you must claim it within six months of losing your job. However, you have up to three years to make a claim if you’re owed money under a different scheme. For example, if you lose your job due to redundancy, you can apply for payment under the Enterprise Management Incentive Scheme (EMIS). This covers payments made to employees who lose their jobs because of changes to the way the company operates.

When you could lose your right to statutory redundancy pay

Statutory redundancy pay is paid out to workers who are made redundant or laid off by their employers. This money is designed to help people cope financially during a difficult period. However, there are some circumstances where it could be lost. Here we look at what happens if you reject an alternative job offered by your employer.

If you accept an alternative job and later decide that you don’t want it, you could lose your entitlement to statutory redundancy pay. This might happen because you didn’t give enough notice to your previous employer, or because you didn’t tell them about the new job.

You could also lose your right to statutory pay if you refuse an alternative job that is similar to your old role. For example, if you’re a teacher and you decline a teaching post in another school district, you won’t qualify for statutory redundancy pay.

How much legal redundancy pay you can receive

Statutory redundancy pay is paid under the Employment Rights Act 1996. It is designed to compensate employees for losing their job due to a change in circumstances outside their control. This could include redundancy, retirement, illness, death or moving house.

The amount of statutory redundancy pay depends on whether you worked full or part time, had a fixed term or permanent contract and what you earned while working for the employer.

For example, if you worked full time and had a fixed term contract, you might get £4,500 per annum. If you worked part time and had a fixed contract, you might get up to £2,000 per annum. If your contract was permanent and you had been earning over £15,000 per annum, you might get up t…

If you are between 17 and 21 years old,

Your employer must give you a “minimum amount of redundancy money” if you are aged 17 or over. This applies even if you don’t work full-time hours. You’ll usually get around £2,400 per month – enough to cover rent and bills. If you are under 18, your parents must provide it.

Your employer must tell you in writing about what redundancy payments you will receive. They must also explain why you won’t get any more pay.

If you are between 22 and 40 years of age,

Your employer must give you redundancy payments if you reach certain ages. If you are over 40, you don’t qualify for redundancy pay under EU law. But it doesn’t matter whether you’re young or old – your employer must tell you about the amount of redundancy pay you’ll receive. You can use our online tool to work out how much you could earn.

The government says employers must tell workers about their redundancy pay in writing within 14 days of making a decision to make redundancies. This includes giving employees a written statement explaining why they won’t be offered employment. Employees must be given at least 28 working days’ notice of redundancy, although some companies may legally offer less than this. They must also be told about their entitlement to statutory redundancy pay.

Employers must calculate redundancy pay based on each employee’s length of service and age when they became redundant. For example, someone who joined in January 2018 and was made redundant in September 2018 would be entitled to £2,400 per month.

If you are 41 or older,

Your employer must give you redundancy payment if you reach an agreed retirement age. If you are eligible, it is up to you how much redundancy pay you want. You can choose whether you take it now or later. But there are some things you need to know before you decide.

The amount of redundancy pay depends on your length of service, the number of employees affected by your job loss and your salary. There are different amounts depending on whether you are male or female. And you might be able to claim a bigger sum if you have worked for more than 10 years.

How do I calculate my redundancy pay?

There are three ways to work out how much redundancy pay you will receive.

1. Work out how many weeks’ pay you’ll lose by retiring. Multiply your weekly wage by 52. This gives you your annual salary. Then add together the total number of weeks worked since becoming an employee. Divide this figure by 52 to find the number of weeks’ pay lost.

2. Calculate your average weekly earnings. Add together the total number of hours worked each week. Divide this figure by seven to find your average hourly rate. Multiply your average hourly rate by 40 to find your monthly income. Subtract this figure from your annual salary to find the number of months’ pay lost. Divide this figure by 12 to find the number of days’ pay lost.

3. Use one of our online calculators to work out how much you could earn if you stayed working.

Calculating redundancy pay when paid in lieu of notice

If you are being paid in lieu of notice, it is important to know how much redundancy pay you are entitled to. If you are eligible for redundancy payment, you must notify your employer within 14 days of the date of termination. This gives your employer enough time to calculate what you are owed.

The amount of redundancy pay depends on whether you are employed full time, part time or casual. Full time employees are entitled to three months redundancy pay. Part time workers are entitled to one month’s redundancy pay. Casuals are entitled to six weeks’ pay.

In addition to redundancy pay, you might be able to claim additional amounts such as unpaid wages, holiday pay or sick pay. These claims are calculated separately.

You do not have to take redundancy pay if you choose to resign rather than accept redundancy. However, you may still be entitled to some financial compensation. For example, you could be entitled to unpaid wages.

You can find out about your entitlement to redundancy pay by contacting an employment lawyer.

Example of calculating redundancy pay when payment in lieu of notice has been received.

If you have been offered PILO, what does it mean? What do you need to know about redundancy pay? How much can you claim? And how long must you work for your employer to qualify for redundancy pay?

This video explains everything you need to know about calculating redundancy pay when you’ve been given payment in lieu…

STORY: “How to calculate redundancy pay when you have received payment in lieu of notice?”

In this video we explain how to calculate redundancy pay when your employer has offered you payment in lieu of notice. We look at examples of different scenarios where you could receive either a lump sum or weekly payments.

We cover:

• When you should take up an offer of payment in lieu of notice

When you’ll get paid

Your employer must give you notice of your redundancy payment. This includes telling you how much it is and when you’re paid. You must receive this information within 21 days of being told you are redundant. If you do not receive this information within 21 working days, you have 14 days to ask for it.

You must be given written confirmation of your redundancy pay. This must include:

• How much you’ll get;

• When you’ll get it;

• Whether you’ll be paid weekly or fortnightly;

• What deductions there might be; and

• Any tax relief you qualify for.

If your employer does not pay you, you have legal recourse.

Your employer must give you notice when they are changing your terms and conditions. These include your redundancy pay. If you do not receive it within 14 days of being told, you can request a written explanation.

You have six months to make a claim for any unpaid wages, including holiday pay.

If your employer is insolvent

Your employer is insolvent or it has gone bust. You are likely to be entitled to a redundancy payment. This is because under EU law, employers must provide workers with redundancy payments if they close down. However, there are some exceptions to this rule. For example, if your employer goes out of business due to natural disasters like floods, earthquakes or fires, the government will step in and pay out your redundancy money. In addition, if your employer closes down due to bankruptcy, the courts will take over and decide whether or not you are eligible for a redundancy payment.

However, if your employer is still trading, you may be able to apply for redundancy payments through GOV UK. This is because GOV UK provides a range of free online services to help people understand and use public services. These include services such as accessing benefits, applying for jobs, claiming tax credits, getting driving licences and registering births, deaths and marriages.

If your employer is insolvency, you should contact the Insolvency Service. They will tell you what to do next.

Frequently Asked Questions

What is counted as reckonable service?

The amount of reckonable service you have accrued during your employment depends on how long you have been employed by the same employer. You must count each day you worked during the tax year as one day of reckonable service.

If you took a holiday within the tax year, it counts as reckonable service. If you had a period of sickness during the tax year, it does not count as reckonable service. However, if you were away from work because of illness, you do not have to pay National Insurance contributions while you were ill. This includes any period of basic and additional paid maternity leave allowed under the law.

You cannot claim reckonable service for absences due to bereavement or funerals.

What about any retraining costs or counselling my employer pays for?

Any costs your employer pays to support you during redundancy or to help you train up for another career are generally taxable. This includes things like training courses, retraining or finding a new role within the same organisation. If your employer provides you with counselling, it could also be exempt.

If you’re unsure whether something is taxable, contact HMRC. You can do so online, by phone or via email.