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1.  How Do I Qualify For A Redundancy Payment?

To qualify for a statutory redundancy payment you must:

  • be an employee,
  • have two years continuous employment with your employer at the date of dismissal,
  • have been dismissed by reason of redundancy.

Dismissal occurs where:

  • your contract has been terminated by your employer with or without notice,
  • you terminate your contract of employment with or without notice because of your employer’s
  • unreasonable conduct (constructive dismissal),
  • you are employed for a fixed term and your contract expires but is not renewed.

No dismissal has taken place if your contract has been renewed or you are engaged under a new contract of employment and the offer is made to you in writing before the end of your contract and is to take effect within four weeks from the end of your original employment.

Redundancy would occur if the dismissal is wholly or mainly because:

  • your employer has stopped or intends to stop business in the place where you are employed,
  • your employer has stopped or intends to stop business for the purposes for which you are employed,
  • your employer’s need for people carrying out work of a particular kind in the place where you work has stopped or reduced or is expected to do so.

You may lose your right to a redundancy payment if you unreasonably refuse an offer of suitable alternative employment made before the end of your original contract.  The new job must begin at latest four weeks after your original employment ends.  Whether the offer is a suitable alternative to your original job depends on factors such as location, pay, hours, holiday, grade, status and travel to work. Even if it is suitable, the employee might still get a redundancy payment if he/she has good grounds for turning it down e.g. personal circumstances or problems that make it reasonable to do so.  If in doubt, you can try the new job for up to four weeks before deciding whether to accept it or not.

There are special, complex rules covering workers who are laid off or are on short time. In summary, lay off happens when an employee gets no money because there is no work.  Short-time means getting less than half a week’s pay. When either happens for at least four continuous weeks of for at least six weeks out of thirteen, the employee can write to their employer claiming redundancy pay. There are then very tricky rules about notices and counter-notices.  If this happens to you, contact your GMB representative for further information.


2. How Much Notice Do I Get On Redundancy And Do I Have To Work It?

The employer should give you at least the statutory notice of a week for each complete year of service, up to a maximum of  12 weeks.  So someone employed for 7 years gets 7 weeks’ notice.  However you might well be entitled to longer notice under your contract of employment – a monthly paid worker should get at least one months’ notice, even if they have been employed for less than four years.    

Be careful not to confuse warnings and consultation, with notice of dismissal.  Notice only counts if it is clearly addressed to you, and specifies the date you will finish work and your employment will end.  If you leave because of a general warning that redundancies are coming, you may lose your redundancy pay.    

Similarly, when your employer does give you notice, you must wait for it to run its course.  Do not leave your job as soon as you receive the notice of redundancy - you may lose your redundancy payment.

If you want to leave before your notice expires e.g. to take up another job, you can ask your employer to agree an earlier termination date, on the basis that you will still get your redundancy payment.  Alternatively, during the statutory notice period you can serve written counter-notice to leave early, and if your employer does not object you can go (with your redundancy pay) when your counter-notice expires.  However before your counter-notice ends your employer can object to it in writing, saying that if you leave early they will withhold your redundancy pay.  You then have the option of leaving when your counter-notice ends, and arguing in an Employment Tribunal that your employer’s objection was unreasonable and that you should get your redundancy pay – a risky strategy.    

Your employer may give you pay in lieu of notice, providing your contract allows for this.    

If you have two years’ continuous service at the time your notice from your employer expires, you are entitled to a reasonable period of paid time off during working hours to look for a new job.    

An employer who proposes 20 or more redundancies within a period of 90 days or less should consult with the recognised union or (if there is none) with representatives elected by the workforce.  Consultation should begin at least 30 days before the first redundancy takes effect.  Where the proposal is for 100 or more redundancies, consultation should begin at least 90 days before the first one is due to take effect.

3. Once I Am Redundant Am I Entitled To Benefits?

You may be able to claim welfare benefits after you have received your redundancy payment.

You may be entitled to jobseeker’s allowance (JSA). This is a benefit for people who are unemployed or who work less than 16 hours a week and who are looking for full-time work.  

There are two types of JSA. Contribution-based JSA is paid if you satisfy the national insurance contributions conditions. Income-based JSA is paid if you have not paid national insurance contributions and you pass the means test.

There are a number of means tested benefits to which you may be entitled including income support, housing benefit and council tax benefit.

Working Tax Credit (WTC) is a means tested benefit for working people on low wages.  Contact the Tax Credit Office of the Inland Revenue for details

To qualify for means tested benefits income, capital (which includes your redundancy payment but does not include your home) and savings must fall within the financial limits.

Volunteering for redundancy should NOT stop you receiving benefits (provided your redundancy payment does not take you over the financial limit for means tested benefits). However, a redundancy payment in excess of the statutory amount will be treated as earnings, and income-based JSA cannot be paid for the period covered by the payment after your employment ended.

4. Who Pays My Redundancy Pay If My Employer Becomes Insolvent?

If your employer is insolvent redundancy payments count among those debts that take priority over others.

If your employer fails to pay your statutory redundancy payment, you may apply to the Department of Trade and Industry for payment out of the National Insurance Fund.

It is quicker to apply to the DTI on your employer’s insolvency than to wait for payment (if any) from the Insolvency Administrators.  If the DTI pays out, they will then claim as much as possible from the Insolvency Administrator.  You cannot claim the same amount twice.

Make a claim to the DTI within six months of your redundancy.

Your full redundancy payment should be paid out of the National Insurance Fund.

Any question about the employer’s liability to pay or the amount of the payment due should be referred to an Employment Tribunal. There is no time limit.

5. How Much Am I Entitled To When I Am Made Redundant?

GMB negotiates enhanced redundancy pay schemes with employers for our members.  Check your contract of employment, or contact your local GMB representative to see if there is an enhanced redundancy pay scheme. 
The amount of your statutory redundancy payment is based on the length of your continuous employment, your age and your week’s pay.

The maximum length of continuous employment that may be counted is 20 years.  You cannot count years when you were under 18, even if you were working.

Your gross weekly pay is limited to a maximum of £475. You are entitled to:

  • One and a half weeks’ pay for each year of employment you were aged 41 and over.
  • One week’s pay for each year of employment you were aged 22 to 40 inclusive.
  • Half a week’s pay for each year of employment you were aged under 22.

Therefore the formula used to calculate your payment is: Years of employment x multiplier x weeks pay (up to £475 limit)

There is no upper or lower age limit on the entitlement of statutory redundancy pay. Your employer will have to pay you the statutory minimum redundancy payment even if you are 18 or over 65.

Example: You are 50 years old and earn £475 per week gross and have been working continuously with your employer for 10 years.  Calculation = 50 years of age (one and half weeks' pay at £475) multiply by 10 years of service.  

The result is the same if your gross weekly wage is higher than £475 per week because you are limited by the £475 maximum.  If your weekly wage is lower than £450 per week, say £190, then you should use this figure.  Therefore you would multiply £190 by 14½ = £2,755.

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