When you are made redundant, your employer should give you a P45, either on your last day of work or shortly after (within a few days) you leave the company. If you are entitled to a statutory redundancy payment it must be paid either on your last day of work or within a few days of your departure date. A Statutory requirement is one that is a legal requirement of the employer.
Self-employed people and members of a partnership do not qualify under the Act, which is the Employment Rights Act 1996. If you require further information you can go either to your local citizens advice bureau (CAB) or the relevant government web site at:
For those who do qualify for a statutory (this means it is a legal requirement of the employer) redundancy payment. The amount of your lump-sum redundancy payment depends on:
For each complete year of continuous service between the ages of 18 and 21, you will receive half a week's pay.
The DTI do provide a look up table on their web site to help you calculate your pay entitlement. Select www.dti.gov.uk/er/redundancy/ready.htm to go to this table.
Certain absences - for example, caused by sickness, pregnancy or temporary shortage of work - can count towards continuous service even if your contract of employment was suspended.
When working out your continuous service for a redundancy payment remember that days lost through industrial disputes do not count (although they do not actually break the continuous service). Any days you were on strike will be taken away from your total length of service.
The Definition of A Week's Pay
If you had normal working hours and your pay did not change, for example with the amount of work you did, your week's pay is simply your basic weekly wage or salary. Overtime earnings are not included unless overtime was part of your normal working hours.
If your earnings changed from one week to another because of piecework or productivity bonus arrangements, your week's pay is worked out by multiplying the number of hours you normally worked in a week by your average hourly earnings over the 12 complete weeks of work before the calculation date. Only hours actually worked are taken into account. If the hours used in the calculation include hours outside normal working hours and paid at higher rates, the higher rate is ignored and the hours are worked out at the normal basic rate.
If your normal working hours varied from week to week because of shift work, and your earnings varied as a result, a similar calculation is done but the average hourly earnings are multiplied by the average weekly hours over the same 12 weeks. If you had no fixed working hours, your week's pay will be your average weekly earnings in the 12 weeks before the calculation date.
If your employer plans to dismiss you and you are due to receive a payment under an occupational pension scheme within 90 weeks of the dismissal, your redundancy payment may be reduced.
You will not pay income tax on a statutory redundancy payment though other redundancy payments you receive from your employer may be taxable - see Inland Revenue booklet Income tax and redundancy: a guide to tax and National Insurance Contributions IR143, which can normally be found on www.inlandrevenue.gov.uk
A statutory redundancy payment will have no effect on any entitlement you may have to a contribution-based Job Seekers Allowance.
Employees Who May Not be Entitled to A Redundancy Payment
The following categories of employees have no right to a redundancy payment under the Act:
The Definition of Dismissal
In general, to be due a payment, you must have been dismissed by your employer rather than have resigned and the reason for dismissal must have been redundancy.
If you are on a fixed-term contract and it ends without being renewed, this counts as a dismissal and you may be due a redundancy payment.
If your employer changes in circumstances covered by the Transfer of Undertakings (Protection of Employment) Regulations 1981, your contract of employment will be transferred automatically to the new employer. You have the right to tell the new or previous employer that you do not want to be transferred. However, this will be treated as a resignation, and you will not be entitled to a redundancy payment. The document Transfers of undertakings (PL699) explains the Regulations.
The Definition of Redundancy
You will be entitled to a payment under the Act only if the reason for your dismissal is redundancy. This means that your dismissal must be caused by your employer's need to reduce his or her workforce. Redundancy may happen because a work place is closing down, or because fewer employees are (or are expected to be) needed for work of a particular kind. Normally your job must have disappeared. It is not redundancy if your employer immediately takes on a direct replacement for you. But it will not matter if your employer is recruiting more workers for work of a different kind, or in another location (unless you were required by contract to move to the new location).
If you are dismissed because of a need to reduce the work force, and one of the remaining employees moves into your job, you will still qualify for a redundancy payment so long as no vacancy exists in the area (type of work and location) where you worked.