Calculating Redundancy Pay
15 November 2018
If you are made redundant after 2 or more years of continuous employment with the same employer, then you are legally entitled to receive the statutory minimum redundancy pay entitlement. The amount of redundancy pay that you will receive will be calculated based on your age, your salary and how many years you have worked for your employer.
If you're facing redundancy and you're unsure of what steps you should take or what the process for redundancy is, see our Employee Guide to Redundancy – How Redundancy Works and Consultation and Selection. If you are concerned that your redundancy is not being dealt with in the correct way by your employer, or you are not happy with the redundancy terms offered by your employer, you can speak to an Employment Redundancy Solicitor for advice.
How Much Redundancy Pay Will I Receive?
Some employers may choose to offer more than the statutory amount, but statutory redundancy pay is the minimum that they are legally obliged to offer. Details of the redundancy pay that is being offered by your employer will be provided to you during the redundancy process. If this is more than the statutory amount then your employer will also explain how the total figure will be calculated.
Statutory minimum redundancy pay is calculated like this:
You will receive half a week's pay for each complete year you've been in this employment while under the age of 22.
You will receive 1 week's pay for each complete year you've been in this employment while aged between 22 and 40.
You will receive 1 and a half week's pay for each complete year you've been in this employment while over the age of 41.
The total amount of weekly pay that will be taken into consideration is capped at a maximum of £571 gross per week. Employees who earn more than £571 gross per week will not receive any more than this and Employees who earn less than £571 per week will receive their gross weekly pay amount.
There is also a cap on the number of years of continuous service that will be taken into consideration. This is capped at 20 years. Any employees who have been in continuous employment for more than 20 years will be affected by this cap.
Statutory Paid Notice Periods in Redundancy
If you have been employed for more than a month by the same employer, then you will be entitled to a statutory minimum paid notice period. Again, some employers may choose to offer more than the statutory amount of paid notice, but this is the minimum that they are legally obliged to offer you.
Statutory minimum paid notice is calculated based solely on the length of time that you have been employed by your current employer. This is calculated as follows:
You'll be entitled to 1 week's paid notice if you've been employed by the same employer for more than 1 month but less than 2 years
If you've been employed by the same employer for more than 2 years but less than 12 years, then you're entitled to 1 week's paid notice for each year of that employment. For example, someone who was employed for 5 complete years would be entitled to 5 weeks' paid notice, while someone who was employed for 10 complete years will be entitled to 10 weeks' paid notice.
You'll be entitled to 12 weeks' paid notice if you've been employed by the same employer for more than 12 years.
Who Covers the Cost of Redundancy Pay?
Your employer will be responsible for covering the cost of your redundancy pay. If the employer in question is insolvent or has gone into Administration, this doesn't mean that you won't be able to claim your redundancy pay. You still have a legal right to claim this and you should contact the Insolvency Practitioner who has taken control of the employer's business, about making a claim to the Government's Redundancy Payments Office.