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Redundancy – An Overview

An employer can make an employee redundant when the employer can no longer:

  • Carry out the business the employee or employees were employed for
  • Carry out business in the place where they’re employed
  • Need them to carry out work of a particular kind

For a redundancy to be genuine, an employer must demonstrate that the employee’s job will no longer exist.

Redundancy Pay

Redundancy is a form of dismissal from an employment. It happens when employers need to reduce their workforce.

If an employee is being made redundant, they might be eligible for certain rights, including:

  • Redundancy pay
  • A notice period
  • A consultation with your employer
  • The option to move into a different job
  • Time off to find a new job

An employee must be selected for redundancy in a fair way, eg because of their level of experience or capability to do the job.

An employee can’t be selected for redundancy because of their age, gender, or if they’re disabled or pregnant etc. If an employee is selected because of age, gender etc, this could be classed as an unfair dismissal.

All employees who meet the requirements for redundancy are entitled to redundancy pay.

Who qualifies for statutory redundancy pay?

An employee who qualify for statutory redundancy pay:

  • Must be 18 years or older,
  • Must have at least two years continuous employment,
  • Must be working as an employee under an employment contract
  • Must be part of a PAYE scheme set up.

Continuous Employment: The employee must have been continuously employed by the same employer without any breaks other than maternity, paternity, sickness and paid/unpaid leave,

Employment Contract: A contract of employment agreed by the employer/employee must exist. The contract of employment does not have to be a written contract, as some employers don not provide this. An employee is still considered as working under contract even if none exists in writing.

P.A.Y.E. Scheme: An employee should be registered with HMRC by their employer. It is the responsibility of the employer that amounts due to HMRC are paid on behalf of the employee from the employees’ gross pay earnings.

The employer must ensure that the employees’ details are reported to HMRC and that the correct tax code is used for their PAYE deductions.

How much is statutory redundancy pay?

If an employee is entitled to a Statutory Redundancy Payment, the amount to be paid will be determined on:

  • How long the employee has worked for their employer
  • Their gross amount of pay for one weeks’ work
  • The employee’s age

An employer is free to pay more than the statutory minimum amount. It is important to note that employers cannot claim any part of these costs back from the state.

Statutory Redundancy Payment is exempt for any deductions for Tax or NI.

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