Redundancy Looming - Know your rights

Friday 24 July, 2020 Money Advice

UK workers could be put at risk of redundancy over the coming months as the Coronavirus Job Retention Scheme gets wound down.

There are currently more than nine million people on the government’s £64bn Job Retention Scheme, which was designed to help prevent mass job losses caused by the coronavirus lockdown.

However, as the scheme starts to wind down from August and the government stops contributing to furloughed workers’ incomes entirely from November, many firms that have suffered as a result of the coronavirus pandemic may not be able to keep employees on the payroll.

It's important to know your rights and entitlements. The following offers an overview of these.

Firstly, as with any significant change in circumstance always notify your Insolvency Practitioner.

Redundancy Rights and entitlements

You’ll only get redundancy pay if it is a genuine redundancy.

There are 2 types of redundancy pay you could get:

  • ‘statutory’ redundancy pay - what the law says you’re entitled to
  • ‘contractual’ redundancy pay - extra money your contract says you can get on top of the statutory amount
  • You’ll have to pay tax on a redundancy payment if it’s more than £30,000. Your employer will deduct any tax for you.

If you're entitled to either type of redundancy pay, it'll be paid by your employer.

Who can get statutory redundancy pay

You’ll get statutory redundancy pay if you:

  • have been employed by your employer for 2 years continuously
  • have lost your job because there was a genuine need to make redundancies in your workplace
  • are a particular kind of worker called an ‘employee’ - this includes part-time employees

If you’re on a fixed-term contract

You will be entitled to statutory redundancy pay if your employer doesn’t renew your fixed-term contract because the job doesn’t exist any more and you had either:

  • a fixed-term contract for 2 years or more
  • shorter contracts that followed on from each other and added up to 2 years or more

Who won’t get statutory redundancy pay

You won’t get statutory redundancy pay if you:

  • have worked in your job less than 2 years
  • are self-employed
  • are a police officer or in the armed forces
  • are a Crown servant, parliamentary staff or holder of public office (for example, a Justice of the Peace)
  • are a share fisherperson
  • are domestic staff working for your immediate family
  • are an employee of a foreign government

Even if you can’t get statutory redundancy pay, you might be able to get contractual redundancy pay. Make sure you check your contract to see what it says about redundancy pay.

When you could lose your right to statutory redundancy pay

Even if you’re entitled to statutory redundancy pay, you could lose your right to it if you:

  • turn down a suitable alternative job your employer offered you without a good reason
  • want to leave before the job is due to end - for example, because you’ve found another job
  • are fired for gross misconduct before your job finishes

How much statutory redundancy pay you can get

You can see how much redundancy pay you'd get using the redundancy pay calculator on GOV.UK.

Redundancy pay is based on your earnings before tax (called gross pay).

For each full year you've worked for your employer, you get:

  • age 18 to 22 - half a week's pay
  • age 22 to 40 - 1 week's pay
  • age 41 and older - 1.5 weeks' pay

If you turned 22 or 41 while working for your employer, the higher rates only apply for the full years you were over 22 or 41.

You won't pay any tax on your statutory redundancy pay.

There are some limits to how much money you’ll get:

  • the maximum weekly amount you can get is £538 - even if you earn more per week
  • you can only get redundancy pay for a maximum of 20 years’ work (for example, if you’ve worked at your job for 23 years, you’ll only get redundancy pay for 20 years)

Paying tax on contractual redundancy pay

Getting advice about contractual redundancy pay

  • If you’re a member of a union, speak to your union rep first - they should have been involved in the redundancy negotiations.
  • If there isn’t a union at your work, you might have an employee representative to help you understand the redundancy agreement.
  • If you don’t have any representatives at work, contact your nearest Citizens Advice. Ask your employer for a copy of your redundancy agreement for an adviser to look at.

Getting your redundancy pay

  • Your employer should pay you your redundancy pay on the date you leave work, or an agreed date soon after.
  • They’ll pay you in the same way they paid your wages, for example into your bank account.
  • You should also get a written statement saying how your payment was calculated.

Should you have any question regarding redundancy and your rights contact your local citizens advice bureau.