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HMRC internal manual

National Insurance Manual

NIM02600 - Class 1 NICs : Earnings of employees and office holders : Payments made on termination of employment : Redundancy payments : Statutory and non-statutory payments

Redundancy payments can be :

  • Statutory. The Employment Rights Act 1996 gives an employee who has been employed for the requisite minimum period, and who is dismissed by reason of redundancy, a statutory right to a minimum level of compensatory payment from their employer.
  • Non-statutory. These are payments made in excess of the minimum statutory payment. Provided they constitute a part of the redundancy payment package in a genuine redundancy situation then they too are compensatory and free from NICs liability.

See NIM02590 for a definition of “redundancy” and NIM02580 for general guidance regarding NIC liability in respectof redundancy payments.

The elements of a redundancy payment, which together constitute the redundancy package,could include:

  • PILONs which may be more than the statutory minimum
  • compensation for loss of pension rights
  • a general sum on account of loss of employment which may, or may not, be more than the statutory minimum.