Redundancy – Notice periods and pay owed

Due to COVID-19, the UK is experiencing one of the worst employment climates it has ever faced. In response to stagnant or unpredictable revenue flow, many employers are implementing safeguarding measures to ensure their businesses can weather the ongoing storm. In these circumstances, the unfortunate reality is that if overheads associated with employees become unmanageable, redundancy can be the option available. 

Our related article (Redundancy – Consideration for Employers) covers many aspects of what should be deliberated when approaching the decision to make staff redundant, but we wanted to provide greater education on the timelines, notice periods and actual pay parameters involved.

Giving Staff Notice:

Employees must be given notice of any effective redundancy using the following parameters:

– At least one week’s notice provided for any employee whose service has lasted 1 month to 2 years.

– A week’s notice for every year employed for any employee whose service has lasted 2-12 years.

– 12 weeks’ notice for any employee whose service has lasted longer than 12 years.

You must provide payment (at full pay rate) to your staff throughout the deemed period.

In the event of an immediate cease in trading (or similar) you are able to allow staff to leave earlier than the planned leaving date. In this case, you must still honour a full payment that reflects the individual’s notice period in its entirety – this is known as ‘pay in lieu of notice’.

Pay in lieu of notice must still be processed with standard deductions such as income tax and National Insurance. Pension, private healthcare insurance and other contributions are still applicable also. 

Statutory Redundancy Pay:

To be eligible for statutory redundancy pay an individual must:

– Be an employee, working under a contract of employment

– Have at least 2 years’ continuous service

– Have been dismissed, laid off or put on short-term working conditions – anyone opting for early retirement does not qualify.

Redundancy payments must be made when you dismiss the employee or very soon after.

A written statement outlining the monetary value owed (and any calculations leading to that figure) must be made available to the employee. You have the option to reduce the qualifying period to less than two years of continuous service should you wish.

Statutory Redundancy Pay Rates:

Pay rates are calculated based on an individual’s age and length of employment (backdated from the time of dismissal). 

Employees experiencing redundancy are entitled to:

– 0.5 weeks’ pay for each full year of employment up to their 22nd birthday. 

– 1 week’s pay for each full year of employment after their 22nd birthday.

– 1.5 weeks’ pay for each full year of employment after their 41st birthday.

There is a length of service cap of 20 years and a weekly pay cap of £538.00 (£560 in Northern Ireland). The maximum amount of statutory redundancy pay per individual is £16,140 (£16,800 in Northern Ireland).

The option is available should you wish to pay your staff supplemental redundancy rates above the statutory limits. 

To calculate statutory redundancy pay for your employees you can use the Government’s employee redundancy pay calculator.

If an employee has a legitimate reason to disagree with your calculations, or you fail in your duties to pay owed redundancy appeals may be launched which could result in an employment tribunal. 

If your business suffers financial hardship to the point of insolvency as a result of redundancy payments, support may be available from the Insolvency Service’s Redundancy Payments Service (RPS). In this case, expect a repayment schedule to be implemented. Visit the Redundancy Payments Service for more information.