Key rules on statutory redundancy payments
Eligibility and exclusions
To be eligible for a statutory redundancy payment (SRP), the employee needs to: (1) have been dismissed by reason of redundancy (or become eligible because they’ve complied with specific rules during lay-off or short time working); and (2) have at least two years’ continuous employment ending with the “relevant date” , i.e. the date their notice period expires or, if dismissed without notice, the date of dismissal (but see below).
Pro advice. There are no lower and upper age limits. Even a child can be eligible for an SRP if they meet the necessary requirements. However, only employees can claim SRPs; workers aren’t generally eligible.
Pro advice. If you dismiss the employee without notice, e.g. by paying in lieu or with less than statutory minimum notice, the relevant date will be extended by the statutory minimum notice period to decide: (1) whether they have the necessary two years’ continuous employment for a SRP; and (2) their length of service for the purpose of calculating the amount of SRP. Special rules apply to determine the relevant date where there’s been a statutory trial period in alternative employment - these aren’t discussed here.
The following employees are excluded from the right to an SRP: (1) those who’ve unreasonably refused suitable alternative employment (see yr.5, iss.2, pg.4 , see Follow up ); and (2) those who fail to work their notice period, in certain circumstances (see yr.4, iss.3, pg.2 , see Follow up ).
Pro advice. The right to a SRP can also be waived using a settlement agreement.
SRP calculation
The amount of a SRP depends on the employee’s age, gross weekly pay and length of service. You must first determine the period during which they were continuously employed ending with the relevant date. You then count backwards from the relevant date, allowing the “appropriate amount” for each of their complete years of continuous service. The appropriate amount is equal to: (1) one and a half weeks’ pay for each complete year of service in which the employee was not below the age of 41; (2) one week’s pay for each complete year of service in which they were aged 22-40; and (3) half a week’s pay for each complete year of service in which they were below the age of 22 (see Follow up ).
Pro advice. Part years don’t count so round down years of service to the nearest full year.
Pro advice. A maximum of 20 years can be taken into account, so if the employee has more than this, the earlier years are ignored.
Pro advice. Gross weekly pay is calculated according to the statutory “week’s pay” formula at the “calculation date” , subject to the statutory cap on a week’s pay. If the employee earns more than the cap, the cap will apply. The calculation date is the date on which, working backwards from the relevant date, you would have to have given notice to comply with statutory minimum notice entitlements, or, if the employee has been dismissed without notice or with less than statutory minimum notice, the date on which their contract would have ended had statutory minimum notice been given.
Pro advice. The employee is entitled to a written statement showing how the SRP has been calculated (see Follow up ). Failure to provide this is a criminal offence.
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