Statutory Redundancy Pay

Statutory redundancy pay is not an automatic right and has the following qualifying criteria:-

1. You are classed as an ‘Employee’ – in most cases you will be an employee if you work under an employment contract;
2. Continuous service for 2 years minimum  – you must have been continuously employed by your employer for at least 2 years;

Types of redundancy pay

There are 2 forms of redundancy pay:

1. Statutory redundancy pay – this is the sum your employer is legally obliged to pay you if you meet the qualifying criteria set out above and they are looking to terminate your contract by way of redundancy. Your employer can not pay you less then this.
2. Contractual redundancy pay – this is often referred to by employees as ‘enhanced redundancy’ where the employer may well have agreed to pay a top redundancy payment over and above the minimum sum they are required to pay by way of statutory redundancy pay.

How much statutory redundancy pay will I receive?

Section 162 of the Employment Rights Act sets out how much redundancy pay you should receive using a statutory formula taking into account how long you have worked for your employer, your age and average weekly pay.

Important points to bear in mind are:

1. Only complete years of service count
2. Only continuous service will count
3. There is a cap of 20 years for which you can be paid redundancy
4. There is a cap of £538 per week you can receive
5. This means there is a cap of £16,140 (2020/2021) on the maximum amount of redundancy pay you can receive, even if your weekly wage is higher or your length of service is longer

The statutory formula to be used is as follows:

1. Years employed while under 21 ½ weeks pay for each year
2. Years employed while aged 22 to 40 1 weeks pay for each year
3. Years employed while aged 41 and over 1 ½ weeks pay for each year