Redundancy Calculator: How to calculate redundancy pay
If you are an employee, and have worked continuously for at least two years for your employer, you have rights to a statutory redundancy payment if you are being made redundant. In the event that you can’t get statutory redundancy pay, you might be possible to get contractual redundancy pay. Make sure you check your contract to see what it says about redundancy pay.
For more information about calculating redundancy pay, including what you need to do to be eligible for it, how to receive it, and expert advice, reach out to us today on 0333 305 9375 or contact us online.
Overview of Redundancy Pay
You’ll only get paid if you have genuine redundancy. There are 2 types of redundancy pay you could possibly get:
Statutory redundancy pay – this kind of redundancy is what’s stated and due according to law. It is also based on a fixed-term contract of at least two years which expires and is not renewed as a result of the redundancy.
Contractual redundancy pay – in contractual redundancy pay, you could get extra money already stipulated by the agreement or contract signed with your employer. The amount is a plus to the statutory amount already set by the law.
Page Contents
- Overview of Redundancy Pay
- How To Calculate Redundancy Pay?
- Who can get statutory redundancy pay?
- Who won’t get statutory redundancy pay?
- When you could lose your right to statutory redundancy pay?
- Common issues with statutory redundancy pay
- What to do if you do not Receive Your Redundancy Pay?
- What Is Contractual Redundancy Pay?
- Paying tax on contractual redundancy pay
- How to get your Redundancy Pay
- How Can IAS Help?
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How To Calculate Redundancy Pay?
Overview
Redundancy pay is established on your earnings before tax (called gross pay). Your redundancy pay will be issued on an utmost of 20 years’ work. For instance, if you’ve worked at your job for 23 years, you’ll only get redundancy pay for the last 20 years you worked.
How much your employer reimburses depends on how old you were during that year of your employment. You’ll get:
- half a week’s pay for each year you were aged under 22
- 1 week’s pay for each year you were aged 22 to 40
- 1.5 weeks’ pay for each year you were aged 41 or older. If you turned 22 or 41 while working for your employer, the higher rates only apply for the full years you were over 22 or 41.
What is the Redundancy week’s pay?
Your week’s pay is the average you earned each week in the 12 weeks before you got your redundancy notice.
The maximum week’s pay is £571. The amount increases on 6 April each year. The maximum week’s pay possible depends on when your employment ends.
What Is the Length of Service?
This is the time you’ve worked for your employer. It is determined by counting the number of full years you’ve worked for your employer. Your length of service should start on your first day at work and finish on the day you were made redundant.
Your length of service might become difficult to determine if:
- you weren’t given the statutory notice period you were entitled to by agreement
- you were given pay instead of notice
In the event that you face any of the above situations, you can figure out your length of service by adding on the amount of statutory notice allowed as per agreement or stated by the law. For example, if you were privileged to 4 weeks’ statutory notice but your employer only provided 2 weeks, you are allowed to add another 2 weeks in order to determine your end date.
Who can get statutory redundancy pay?
You can get statutory redundancy pay if you:
- have worked for your employer for a continuous minimum of 2 years
- were made redundant at your job because there was a genuine need to make redundancies in your workplace
- if your employer recognises you as an employee
- If you’re on a fixed-term contract. You might be an employee even if your employer or your contract says you’re self-employed.
You will be qualified to statutory redundancy pay if your employer doesn’t continue your fixed-term contract because the job doesn’t exist any more and you had either:
- a fixed-term contract for 2 years or more
- shorter contracts that followed on from each other and added up to 2 years or more.
Who won’t get statutory redundancy pay?
You won’t get statutory redundancy pay if you:
- have worked with your employer for less than 2 years
- are self-employed
- are a police officer or in the armed forces
- are any Crown servant, parliamentary staff or holder of public office (for example, a Justice of the Peace)
- are a share fisherperson
- are domestic staff working for your immediate family
- are an employee of a foreign government
When you could lose your right to statutory redundancy pay?
Even if you’re qualified to statutory redundancy pay, you could forfeit your right to it if you:
- decline a suitable alternative job your employer proposed to you without a good justification
- want to leave before the job is scheduled to end – for instance, because you’ve found another job
- are terminated for insensitive misconduct before your job finishes
Common issues with statutory redundancy pay
- You’re getting sick pay
- You’re on maternity leave
- Your hours change each week
- You work overtime
- you’ve agreed on a temporary drop in wages
- you’ve been laid off or put on short-time working
- If your company’s been taken over
- If the business you work for has closed down
What to do if you do not Receive Your Redundancy Pay?
Your employer should pay your redundancy pay in the same way they paid your wages. If they don’t, you can take steps to get your pay.
There are things you can do to claim money your employer owes you – including statutory redundancy pay.
What you need to do depends on whether your employer is ‘insolvent’. This is a legal process an employer goes through if they can’t pay their debts and have to close. It’s also known as being in ‘liquidation’ or ‘administration’.
You should check if your employer is insolvent if they’ve:
- closed down but you can’t get in touch with them
- said they’re insolvent but no one has told you what to do to claim your money – this means they might not really be insolvent
- If your employer is insolvent
- Check if you can get contractual redundancy pay
Take the following steps to remind your employer about your overdue payments:
Step 1: write your former employer a letter
Inform them of your entitlements and include any evidence you have to support your claims. It’s advisable you do this through an employment lawyer so your claims are taken with utmost seriousness. Do reach out to us on 0333 305 9375 or contact us online to help you.
Step 2: early conciliation
If you don’t get your payment after sending your letter, you need to contact recognised agencies or bodies necessary to resolve such conflicts of interest.
Step 3: take your employer to a tribunal
This should be your last resort. Going to a tribunal can be costly and stressful. It is a good idea to get advice from your IAS Law before you go ahead.
Your deadline for pleading any redundancy pay you’re entitled to is six months minus a day from the last day you were employed. If you’re also claiming unfair dismissal or notice pay, then you have 3 months less a day.
What Is Contractual Redundancy Pay?
You may qualify to receive extra money from your employer on top of the statutory amount stated by law. This is called ‘contractual’ or ‘enhanced’ redundancy pay. Make sure you check your agreement to know what you deserve to get.
If you were not given a valid contract or your contract doesn’t include contractual redundancy policies, ask your employer or check your staff handbook or intranet.
By law, your contractual redundancy pay can’t be less than the statutory amount.
Paying tax on contractual redundancy pay
You don’t have to pay tax on the first £30,000 of your redundancy pay. For any redundancy pay over £30,000, your employer will usually take the tax at your normal tax rate.
If your employer pays you your final pay after you leave your job, they’ll take the tax from your redundancy pay at the basic rate of 20%. If you pay a higher tax rate, you need to call HMRC to arrange to pay the extra tax.
How to get your Redundancy Pay
Your employer should pay you your redundancy pay on the date you leave work, or an agreed date soon after.
They’ll pay you in the same way they paid your wages, for example into your bank account.
Your employer has to tell you in writing how your redundancy pay was calculated and when you’ll get your payment.
How Can IAS Help?
We are a formidable team of professional and knowledgeable employment lawyers with years’ of experience working in UK employment law. We have helped countless people overcome hurdles to settle employment law issues and obtain what they deserve.
Whether you need expert advice on how to obtain or calculate your redundancy pay, your employer has refused to pay, or you received lower than what you believe should have been your redundancy pay, we can help.
We can provide advice or reach out to your employer on your behalf to ensure you get what is yours by law. For more information about how we can help, reach out to us today on 0333 305 9375 or contact us online.
Last modified on May 4th, 2023 at 3:00 pm
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