In periods of economic difficulty it is often necessary for a company to reshuffle its structure. This sometimes means that a job disappears and an employee becomes redundant.
In the event that they are made redundant, an employee may be entitled to receive compensation which can come in two basic forms, either statutory redundancy pay or contractual redundancy pay.
Statutory Redundancy Pay is always payable; an employer may enhance the redundancy pay package by adding to it, but Statutory Redundancy Pay must always be an element of it.
A company sometimes devises it own contractual redundancy agreement with its employees, this may pay more than the statutory rate or contain additional rewards. Even if an employee’s contract does not outline a redundancy pay plan they may still be entitled to statutory redundancy pay, which is governed by law.
To qualify for statutory redundancy pay an employee must fit the following criteria. They
- Must be an employee (i.e. not employed on a temporary contract or as a self-employed partner/affiliate)
- Must have been continuously employed by same employer for at least 2 years.
Dismissals and Resignations
If an employee resigns they are not entitled redundancy pay. Nor will they be entitled if they are dismissed from their position for disciplinary reasons.
To quote an overused phrase ‘the post is redundant, not the person’ although the net result is that the person loses their job.
Legally speaking, the term redundancy covers three meanings, an employee may become redundant if:
- The organisation for which they work closes
- Their place of work closes
- There is reduced need for employees to carry out work of a particular kind.
There are some instances in which an employee will lose their right to statutory redundancy pay:
- If the employee leaves before the date their employment with the company is due to end they may forfeit their right to statutory redundancy pay.
- If you, (the employer) offers suitable alternative work, which is then refused by the employee without good reason they may not receive redundancy pay.
The amount of statutory redundancy pay an employee receives is calculated according to the age, pay (up to a £400 per week for every whole year of completed service, maximum limit) and how long they have been continuously employed.
An employee is entitled to get
- 0.5 week’s pay for each full year of service up to the age of 22
- 1 week of pay for each full year of service over the age of 22 but under the age of 411.5 weeks pay for each full year of service over the age of 41
It is always the responsibility of the employer to administer/ inform the employee of their redundancy rights. An employee should not have to seek out redundancy pay.