When Should A Redundancy Payment Be Paid?
09 August 2019
If an employee's role is made redundant and they are entitled to receive a statutory redundancy payment, this should be paid along with any outstanding wages and holiday pay and is usually paid with their final wage. If you disagree with the amount that you have received in your final pay, then raise this with your employer. If you are unable to resolve the issue then you may be able to make a claim to the Employment Tribunal.
Who is Eligible to Receive a Redundancy Payment?
In order to be eligible to receive a statutory redundancy payment, an employee must have been employed by their employer for at least 2 years continuously. Workers who are not employed (such as apprentices or those who are self-employed) are not eligible for a statutory redundancy payment.
Employees may not be eligible for a statutory redundancy payment if their employer has offered to continue their employment or has offered them suitable alternative work. If an employee resigns from their role or is dismissed because of misconduct then they are not eligible for a statutory redundancy payment.
Some employers will offer redundancy packages which pay employees more than the statutory minimum amount, but they are legally obliged to pay at least the statutory minimum amount.
How is Redundancy Pay Calculated?
Redundancy pay is calculated based on the employee's age and their length of service.
Statutory redundancy pay is calculated as follows for those that have been employed by their current employer for a continuous period of 2 years or more:
For each full year of employment when the employee was under the age of 22, they will receive half a week's payFor each full year of employment when the employee was between the ages of 22 and 40 (inclusive) they will receive one week's payFor each full year of employment when the employee was aged 41 or more, they will receive one and a half week's pay
When calculating statutory redundancy pay, an employee's length of service will be capped at 20 years, and their weekly pay will be capped at £525 (as of 6 April 2019).
Any redundancy payment that an employee receives under £30,000 will not usually be liable for tax. This includes severance pay. However, any salary, notice and holiday pay that is paid will be liable for tax and National Insurance contributions at the usual rate.
Who Pays Redundancy Pay?
The employer is liable for paying a redundancy payment to any employees whose roles have been made redundant. They have a legal obligation to pay at least the statutory minimum redundancy payment to any eligible employees.
Sometimes the employer in question is in administration liquidation. If the company goes into liquidation then this means all of its assets are being sold off to cover outstanding debts, which includes any statutory redundancy payments that are due to employees. If the company goes into administration, then the Administrator (the organisation that has come in to try to keep the company going) will be responsible for ensuring that eligible employees receive their redundancy payments.
What If They Don't Pay?
If your employer fails to pay you your redundancy pay, the first step you should take is to notify them of this and request that the payment is made. This may be an administrative error that can be rectified directly with your employer. If they still fail to pay your redundancy pay after you have contacted them, then you may be able to make a claim to the Employment Tribunal.
It's important to act quickly in this situation, as strict time limits will apply. Contact our Employment Solicitors who will be able to provide you with legal advice and practical guidance on the next steps to take.