PART 4: STATUTORY PAYMENTS
Rights Act 1996.
In general, a Statutory Redundancy Payment is due when an employee is dismissed (rather than having resigned) due to redundancy. For redundancy to exist, whether compulsory or voluntary, a job must disappear. This may be as a result of an employer closing down, a reduction in the workforce or a decision to reduce ‘or remove entirely’ particular employees (but note that a redundancy does not exist where an employee is directly replaced). Where employees have elected to retire in the context of projected redundancies, this might be construed as resignation or termination by mutual consent. In these circumstances the employee may not be entitled to receive redundancy pay (Court of Appeal, Birch and Humber v University of Liverpool (1985)). There are also limited but specific employment exclusions e.g. share fishermen, merchant seamen, and employees of the Crown. Qualification The current provisions are based on the amendments to the scheme made from 1st October 2006 to accommodate the Age Equality Regulations. COPYRIGHT © 2021 THE CHARTERED INSTITUTE OF PAYROLL PROFESSIONALS Employees are entitled to statutory redundancy pay if they have been working in Great Britain and have completed at least two years’ service. There is no lower age limit (age 18 prior to 1st October 2006). There is no upper age limit (prior to April 1994 the maximum age of entitlement for women was 60 and prior to 1st October 2006 the upper age limit for entitlement was 65, with entitlement tapering off after age 64). Service Calculation of entitlement is directly related to the employee’s period of continuous service with that employer, (reckonable service). Length of service is counted backwards from the “relevant date”. In cases where the employer gives less notice than the employee is entitled, the “relevant date” is the date at the end of the employee’s proper notice entitlement. Absences caused by adoption, pregnancy, paternity leave, sickness or temporary shortage of work will generally count towards continuous service. Periods lost through industrial disputes do not count (but they do not break continuous service). Calculating Redundancy Pay The number of years’ service is calculated in whole (completed) years and entitlement is calculated for each completed year within age groupings • age 17 to 22½ week’s pay • age 22 to 41 1 week’s pay • age 41 upwards 1½ week’s pay. No printing, copying or reproduction permitted. Statutory Redundancy Pay is not subject to tax deduction provided that when added to any contractual redundancy or other termination payments the whole amount does not exceed £30,000. It is paid free of employee NICs regardless of the total amount. From 6th April 2019 employers NICs are due on all redundancy amounts above the threshold of £30,000.
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