If you have worked continuously for an employer for at least two years and you're being made redundant, you have the legal right to redundancy pay. You’re also eligible if you have a fixed-term contract of two years or more that expires and is not renewed because of redundancy.
For anyone else, although you're not entitled to redundancy money, but you are eligible for notice period money and any holiday pay you’re owed.
For any reason other than gross misconduct, when you lose your job you are owed notice pay. Exactly how much notice you are owed will be covered in your employment contract, but it tends to be anywhere from 1 week to 6 weeks – longer for many management positions.
You will usually be required to work your full notice until it has been satisfied; however, in the case of redundancy, they may ask you to leave immediately. If this is the case, they will still owe you the full amount of pay to cover the notice period stated in your contract, regardless of whether you've worked it or not. This is called ‘Payment in lieu of notice’. This is often the preferred choice as you get full pay but don’t have to work, giving you plenty of time to search for a new job. This payment should be made direct to your bank account at an agreed time shortly after you leave.
When you are made redundant, you are also entitled to any holiday pay you are owed for untaken holiday days. However, be wary - if you have taken MORE days than your entitlement your employer is within their legal rights to dock this from your final pay settlement.
Statutory Redundancy pay
This is redundancy pay that all employers HAVE to pay by law. You don’t have to claim redundancy pay from your employer – this should always be paid automatically to you in the same way your wages are. If, however, they don’t do this, put the request in writing. If they fail to comply you can take them to an Employment Tribunal.
So, how much?
Exactly how much redundancy pay you’re owed depends on how long you have worked for your employer (minimum 2 years), how old you are and how much you earn a week. The redundancy pay limit is capped at £430.
What you’ll get:
- Half a week’s pay for each full year of service where your age was under 22
- 1 week’s pay for each full year of service where your age was 22 or above, but under 41
- 1.5 week’s pay for each full year of service where your age was 41 or above.
The maximum number of years that can be taken into account is 20 years.
Contractual redundancy pay
This is extra redundancy pay and not everyone is entitled to it. If you receive this, you should still receive the full statutory redundancy pay as well.
This extra payment can only be enforced if it’s stated in your employment contract. Some companies offer extra pay as part of their benefits package and you could earn a lot more than the government minimum.
Know the law
If your employer hasn't followed the strict legal processes required by law for redundancies then you may be able to claim extra money for unfair dismissal. Know your rights!
Redundancy law - are you affected?
Unfair dismissal guide