Redundancy

Lots of people take a career break when they've been made redundant. It's a good way of turning a negative event into a positive one – plus, your redundancy pay could come in handy!

This page is about your rights if you're made redundant because you need to know what you're entitled to if you are laid off. It was written by a lawyer for non-lawyers – consult your own lawyer if your situation is complicated.

Eligibility

Calculating your payment

Example

Taking it further

Eligibility

You are eligible to claim a redundancy payment if the following 5 conditions are satisfied:

1. you are an employee
2. you have been dismissed*
3. you have been continuously employed for at least 2 years
4. you are over the age of 20 at the date of dismissal
5. you have been dismissed by reason of redundancy**

* Dismissal in this context has 3 meanings:

1. your contract is terminated by your employer; or
2. you are working under a fixed term contract which expires without being renewed; or
3. you are constructively dismissed (this means you resign in response to a breach of contract by your employer).

** Redundancy has a technical meaning, but usually it means either that

• your place of work has closed down; or
• that your employer's requirement for the work you have been doing has ceased (e.g. because a more efficent work system was implemented which means less manpower is required).

If your employer offers you another job and you unreasonably refuse it, you will lose your right to a redundancy payment.

Calculating your payment

Redundancy payments are calculated by applying a formula. It's based on your age, how long you worked there, and your current weekly pay.

Working back from the date of termination of your employment, you are entitled to

• one-and-a-half weeks' gross pay for each complete year of continuous employment in which you were 41 or over;
• one weeks' gross pay for each earlier year in which you were 22 or over;
• half a week's gross pay for each earlier year in which you were 18 or over.
• No account is taken of years you worked at age 16 and 17.

The total number of years to be taken into account is subject to a maximum of 20. A weeks' gross pay is subject to a maximum of £280. The maximum redundancy payment is, therefore, £8,400.

When you are given your redundancy payment, your employer must give you a written statement of how the amount has been calculated so you can check its accuracy.

Example

Laurie is aged 24 when dismissed by reason of redundancy. He has been continuously employed for 8 years and his gross basic weeks' pay in his last week was £300. However, he can only claim the maximum weeks' pay of £280. He has worked

• 2 years under the age of 18 (not taken into account)
• 4 years over 18 and under 22 (half a weeks' pay per year)
• 2 years over 22 (one weeks' pay per year)

His redundancy payment will be:

1 (weeks' pay) x 2 (years of work) x £280 (maximum) = £560
0.5 (weeks' pay) x 4 (years of work) x £280 (maximum) = £560

Giving a total of £1,120.

Taking it further

If your employer doesn't give you a redundancy payment or you calculate it is too little you should try to sort it out with your employer first.

If you cannot reach a satisfactory agreement you can take the matter to an employment tribunal. You must commence proceedings at the tribunal within 6 months of your dismissal. It won't usually cost you anything and you don't need a lawyer. Much useful information about handling a tribunal claim can be found at www.employmenttribunals.gov.uk.

This page was written by Laurie Toczek, a solicitor and lecturer in employment law.

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