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What you’re entitled to if you’re made redundant; understanding the rules of redundancy pay

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Being made redundant is a huge emotional as well as financial shock. But if you understand the pay you may be entitled to, you may feel you have a little more control over what’s happening.

Redundancy pay
Not everyone is entitled to statutory redundancy pay. If you’ve been working for the company for less than two years, or you’ve had periods within those two years when you weren’t employed by them, you won’t be entitled to redundancy pay.

  • You should be entitled to a statutory redundancy payment if you’ve worked for the company continuously for two years either as a staff member or on a fixed term contract of at least two years.
  • The minimum amounts vary from half a week’s pay for each year you were at the company if you’re aged 22 or under to a week’s pay if you’re aged between 22 and 41, and one and a half weeks if you’re over 41.
  • You don’t have to pay tax or National Insurance on your redundancy payments if they’re below £30,000, but you do have to pay tax and NI on unpaid wages or bonus payment.
  • The maximum statutory redundancy pay you’re allowed to get is £479 a week (in tax year 2016-17), or £14,370 a year.

SAVVY TIP: Some companies automatically pay more than the minimum, statutory amount of redundancy pay. Others have a pot of money set aside to increase their redundancy pay offers. Don’t feel you have to accept the first figure they come up with.

What happens if your employer goes bust?

If your employer goes bust and you’re owed wages, commission or a bonus, you may not get the money you’re entitled to.

  • In theory you can claim up to eight weeks’ pay (for failing to consult on the redundancies collectively), up to six weeks’ holiday pay and up to 12 weeks in lieu of notice, as well as unpaid pension contributions and a basic award for unfair dismissal.

SAVVY TIP: If there isn’t enough money left to pay you in full, you should ask for a direct payment from the National Insurance Fund.

  • If you’re a becoming a parent or are sick you are entitled to statutory maternity, paternity or adoption pay, or statutory sick pay. This will be paid by HM Revenue and Customs.

    SAVVY TIP: If your employer is insolvent and you’re having trouble getting these payments, call HM Revenue and Customs on 0191 225 5221.

  • Getting a payment from the National Insurance Fund
  • Write to your employer first of all. If they can’t pay you, you can get a form called RP1 from the insolvency practitioners appointed to deal with your employer’s company. Or you can call the Redundancy Payments Enquiry Line on 0330 331 0020.

SAVVY TIP: The maximum redundancy pay you’re allowed to claim is £479 a week (in tax year 2016-17), or £14,370 a year.

  • Some pay is given priority (it’s called a ‘preferential debt’), which means it should be paid ahead of money that’s given to other creditors.

What happens if your employer offers you a new job?

Your employer, a sister company or another firm that takes it over may offer you a new job, but it can’t be any old job. Instead it should be something you’re able to do.

  • If the offer is made before your old contract runs out and the job starts within four weeks, you won’t get redundancy pay if you decide to go ahead and take it.
  • You don’t have to make your mind up on the spot as you’re allowed – by law – to try out the new job for four weeks.

SAVVY TIP: If you don’t want to carry on after that your four-week trial period because the job needs different skills or is based miles away from your previous job you can turn it down and still receive any redundancy pay you were originally entitled to. But if you refuse the job just because you don’t fancy it or if you stick at it for more than four weeks, you’ll lose your right to any redundancy pay.

Useful links:

There’s information about what you’re entitled to at the redundancy section of the government’s Gov.uk website, including a calculator where you can calculate your redundancy pay.  There’s also a redundancy payments factsheet which you can download from the Gov.uk website.

Citizens Advice also has useful information. I’m linking to the home page because information is broken down into which part of the UK you’re based in.

Related articles:

If you’re worried about being made redundant, how can you protect your finances?

Starting a business after you’ve been made redundant – what you need to think about

Your rights if the bailiffs call

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