Redundancy

There’s often a big difference between the statutory redundancy payment and the actual payment received. Fortunately the latter amount is often much higher. This is due to discrepancies in the redundancy process whereby managers often get rid of people as personal agenda. To find out how much you should be going for, try our free Compromise Calculator.

For your employer to make you redundant, they they are supposed to pay you at least the minimum redundancy payment prescribed by law. Strictly speaking, you are not actually entitled to receive any more payments than the redundancy minimum and your salary up to the end of your notice period.

Unfortunately, the statutory minimum is peanuts. Often in the news you will see huge redundancy payouts: these might be common in the public sector or in large companies, but most people don’t get offered this much. See also our page ‘how much money should I get?’

Statutory redundancy pay

To qualify for a statutory redundancy payment, you must have been continuously employed for at least two years. Statutory redundancy pay is calculated with reference to your number of completed years service. You get:-

• 1.5 weeks’ pay* for each year in which you were 41 years old or above;
• 1 weeks’ pay* for each year in which you were over 22 but under 41 years old;
• 0.5 weeks’ pay* for each year in which you were under 22 years old.

*Unfortunately, a weeks’ pay is subject to a maximum figure of £430. The maximum number of years which may be counted is 20. Redundancy payments up to £30,000 are not taxable, the statutory redundancy money is never going to reach £30,000. Even if you have been somewhere for say 20 years, from the age of 41 to 61, you would be entitled to only (20 x 1.5 x 380) = 11,400. Lets face it, this is peanuts for 20 years’ committment.

An employer must give all employees a written statement showing how the amount of their redundancy pay has been calculated. An employee who does not receive their redundancy payment can make an employment tribunal claim within six months of the redundancy. Any claims after six months are at the discretion of the employment tribunal.

Any money above the statutory minimum is offered in exchange for you agreeing not to sue your employer. If your compromise agreement provides much more money that the statutory minimum, it is often a good idea to take it, because the alternative, an employment tribunal claim, can be quite daunting.

Redundancy procedure

In order to make redundancies, the employer should:

• Have a genuine economical, technical or organisational reason for making redundancies, such as reduction in client demand or more efficient systems. (Employers can even make employees redundant and then recruit similar employees on lower salaries. This counts as an economic reason.)

• Apply fair and open selection criteria. This could be, for example, ‘first-in last-out’, whereby the longest serving employees are not selected for potential redundancy.

• Consult the employees. Where the are less than 90 redundancies, this consultation should be done individually. If there are more than 90, it can be done en masse.

• Offer the employees alternative employment. There may be other positions available within the company, for which the employee should be allowed to apply.

It is quite easy for employers to follow the process and it can be difficult for an employee to challenge this in court. Not many employees have access to the company accounts which might show a downturn in business, for example.

Procedurally, there needs to be at least one meeting with the employer and they should give you written notice of the meeting and give you the chance to bring a colleague to accompany you. They can ask questions but can’t answer questions on your behalf. At the meeting they will have to say to you we are going to discuss your redundancy. That will be a serious meeting where you can have a long chat. You can raise any and all issues that you have.

If you are a member of a trade union you can take your union rep to the meeting. If you have some potential claims to bring against the employer, this meeting may be a good time to mention, ‘without prejudice’, that you would like to enter into a compromise agreement. You should try to negotiate an amount of money that you would be prepared to accept.

Suitable alternative employment

An employer can offer suitable alternative employment to employees at risk of redundancy. Whether the alternative employment is suitable depends on the employee s current job, the type of alternative job offered and pay, prospects, conditions and location on offer.

An employee can still refuse to accept a suitable alternative and still be entitled to redundancy payment if their refusal was reasonable, eg due to health, family commitments and similar reasons.

An employee is entitled to a trial period of four weeks in the new job, during which time the employee can still leave and claim redundancy.

If you’re thinking about getting some representation have a look at the Testimonials page to see how others in your situation were helped on their journey, or check the Representation page to see our fee structure.

If you want help with negotiating a better redundancy payment or if you have any other compromise agreement query, including how to get representation at no up front cost, email us on info@compromiseagree.com, call us 0800 533 5134 or send a message in the box to the bottom right.