Redundancy FAQ
When is an employee entitled to a redundancy payment?
Currently, once an employee has completed 2 full years of service they will become entitled to receive a statutory redundancy payment.
How many weeks' pay is an employee entitled to?
This is calculated using a formula based on your age and length of service (up to a maximum of the last 20 years). The formula then multiplies the number of years of service, but the figure depends on your age when your employment ended. You get half a week's pay for every year you worked aged 21 or below, one week's pay for the years worked between 22 and 40 and 11/2 weeks for each year worked aged 41 and over.
A useful ready-reckoner can be found at http://www.direct.gov.uk/redundancv.dsb
What is the current weekly limit for statutory redundancy pay?
The statutory limit is capped at £430 gross per week’s pay. An employer can pay you above this figure if it wishes.
How long will it be before I can expect my redundancy payment?
The redundancy payment should be paid on the last day the employee works or as soon as possible after that date.
Do I pay tax and NI on my redundancy payment?
There are no deductions on redundancy payments up to £30,000. Above that figure, the HMRC should be contacted.
How much statutory notice is an employee entitled to?
The statutory notice period is one week for every complete year of service, up to a maximum of 12 weeks. Where the employee has one complete month of service but less than one year, the employee is entitled to one week’s notice. However, if the employee's contract states a longer period of notice than is provided by statute, the contractual notice period will prevail.
Does the employee pay tax on their notice pay?
Tax may not be deductable on an employee's notice pay under certain circumstances and depending on the terms of the employee's contract of employment. The local tax office would have to be contacted to ascertain this.
Is the employee entitled to a redundancy payment where they only work a few hours per week?
The number of hours worked is irrelevant. Provided that the employee has worked for their employer for two years or more, then the employee is entitled to a redundancy payment.
Are employees entitled to a redundancy payment if they are over 65?
Yes. Since 1 October 2006 employees over 65 became entitled to redundancy payments.
See also Redundancy Factsheet.
Contact Us
You can contact the employment law team in Edinburgh, Glasgow or London. For an initial informal discussion contact Innes Clark:
T: 0131 247 1181
E: innes.clark@morton-fraser.com
