Redundancy - Getting it Right

by Kate Russell

Common questions

  1. Do all my employees qualify for redundancy pay?
  2. How is redundancy pay calculated?
  3. Do I deduct tax and NICs from notice pay?
  4. Can I make part-time employees redundant?
  5. One of my employees is over 65. Is he entitled to redundancy payment?
  6. How much notice of redundancy do I have to give?
  7. Do employees at risk of redundancy keep their company car and mobile phone during the notice period?

 

1. Do all my employees qualify for redundancy pay?

Employees will qualify for redundancy pay if they have two years’ continuous service with the employer making them redundant.

If they are made redundant following a TUPE transfer, their service will be regarded as continuous.

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2. How is redundancy pay calculated?

Calculations of statutory redundancy pay are based on complete years of service, a multiplier based on age and a week’s pay. The week’s pay is capped at a statutory level. See the statutory levels currently in force.

Statutory pay can be enhanced, but take care that you avoid claims of age discrimination. One option is to follow the Government’s statutory model.

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3. Do I deduct tax and NICs from notice pay?

A payment in respect of notice worked or paid in lieu, is regarded as remuneration and is therefore subject to tax and NICs deductions.

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4. Can I make part-time employees redundant?

You can make part-time employees redundant so long as the selection process is fair and you do not select an employee for a reason related to his part-time status.

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5. One of my employees is over 65. Is he entitled to redundancy payment?

The age discrimination legislation removed the upper and lower age limits in relation to redundancy. Provided the employee has two years’ continuous service, he is entitled to receive a redundancy payment.

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6. How much notice of redundancy do I have to give?

If fewer than 20 people are at risk of redundancy, the consultation period can be relatively short.

Where 20 or more jobs are at risk of redundancy, you will have to consult for at least 30 days before issuing redundancy notices.

The notice of termination that an employee receives will correspond to the notice shown in his contract, or the statutory minimum for his service, whichever is the greater.

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7. Do employees at risk of redundancy keep their company car and mobile phone during the notice period?

Employees who are at risk of redundancy will keep their contractual entitlements throughout the process, including the notice period, even where the notice period is not worked. Therefore benefits such as medical insurance will be provided through the notice period.

If the company car or mobile is provided because it’s a tool for the job, and the contract clearly establishes no contractual right to it, then these may be recovered.

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