Employees you make redundant might be entitled to redundancy pay - this is called a ‘statutory redundancy payment’.
To be eligible, 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-time working - those who opted for early retirement do not qualify
You must make the payment when you dismiss the employee, or soon after.
A redundant employee also has the right to a written statement setting out the amount of redundancy payment and how you worked it out.
Statutory redundancy pay rates
These are based on an employee’s age and length of employment and are counted back from the date of dismissal.
- 1.5 weeks’ pay for each full year of employment after their 41st birthday
- a week’s pay for each full year of employment after their 22nd birthday
- half a week’s pay for each full year of employment up to their 22nd birthday
Length of service is capped at 20 years and weekly pay is capped at £525. The maximum amount of statutory redundancy pay is £15,750.
You can give your staff extra redundancy pay if you want to, or have a qualifying period of less than 2 years.
You can use the redundancy pay calculator to work out payments.
If you do not pay
If you fail to pay redundancy pay or if an employee disagrees with the amount, they have 3 months from the date their employment ended to make a claim for payment to an employment tribunal.
If an employee does not claim in time, a tribunal still has 6 months to decide whether or not they should get a payment.
If you have financial difficulties
If your business would become insolvent as a result of making the statutory redundancy payments, the Insolvency Service’s Redundancy Payments Service may be able to help.
You’d have to repay any debt as soon as possible - contact the Redundancy Payments Helpline for more information.
Redundancy Payments Helpline
Telephone: 0330 331 0020
Find out about call charges
Employees who’ve been made redundant only pay tax on payments over £30,000. They do not pay any National Insurance.
Tax and National Insurance are deducted from other termination payments, for example payment in lieu of holiday or notice.