Redundancy Pay, Consultation & Guarantee Pay

Redundancy

Consultation Requirements

The requirements differ according to number of individuals affected as noted below.

Consultation for 1 – 19 Employees

There is no stipulated length of consultation before the first dismissal may take place. However, there is an expectation that reasonable consultation will occur with the individuals affected.

Consultation for 20 – 99 Employees

Mandatory consultation period before the first dismissal is 30 days if 20 to 99 employees are affected;

Employer must consult with the recognised trade union. If no union is recognised the requirement is to consult with existing employee representatives or body; if such a body is not in existernce.

Specific information has to be provided during the consultation process to the union or employee representative body.

Consultation for 100 or more Employees

Mandatory consultation period before the first dismissal is 45 days if 100 or more employees are affected;
Other requirements apply as for 20 – 99 employees

If there is no recognised trade union nor a body of employee representatives, the employer must arrange an election of employee representatives for this purpose.

Specific information has to be provided during the consultation process to the union or employee representative body.

Failure to Consult Trade Union or Inadequate Consultation re Reundancies

–  A Protective Award may be decided by a Tribunal = up to maximum of 90 days gross pay per employee affected.
–  Only the Trade Union or elected employee representatives can initiate a claim.
–  Employees must have been made redundant before the claim is initiated.

Redundancy Pay

Qualifying Condition for Redundancy Pay

An individual must have 2 or more years continuous service with the employer or an associated employer.

Redundancy Pay – Amount

Redundancy pay depends on three factors:

  • The individual’s age when made redundant;
  • His/her length of continuous service but the maximum number of years to be taken into account is 20;
  • The amount of the individual’s weekly pay.

The individual’s age at the date of dismissal affects the amount of redundancy pay as below:

–  Years of service aged 41 and upwards count for one and a half week’s pay.
–  Years of service between ages of 22 and 40 inclusive count for one week’s pay.
–  Years of service aged 21 or under count for half a week’s pay.

Only complete years of service are used for the calculation

The individual’s length of continuous service affects the amount payable.

Examples;

a) Age 55 with 10 years service – each year attracts one and a half weeks of pay i.e 15 weeks pay;
b) Age 66 with 25 years service – each year attracts one and a half weeks of pay but only 20 years are counted i.e. 20 x 1.5 weeks = 30 weeks pay;
c) Age 28 with 10 years service – each year of service under 22 attracts half a weeks pay and each year aged 22 or over attracts one week i.e. 9 weeks pay

Calculation of Redundancy Pay ~

The rate of a week’s pay at the date of dismissal is used but a cap applies of £544 per week.
A maximum of the last 20 complete years of service can be counted.

The maximum redundancy payment is £16,320  (£16,140) but most payments are smaller as to gain the maximum amount you need to have 20 years continuous service from age 41 or over and your earnings would need to be £544 or more per week.  Hence the maximum payment of 20 weeks x 1.5 weeks x £544 = £16,320.

However, other monies may also be due at the date of dismissal such as notice pay and any entitlement to holiday pay that has not been taken.

Redundancy – Time Off to Look for a Job or to Retrain

If an individual has been informed that he/she will be made redundant, the following rights arise:

  • Reasonable time off to look for a job or to retrain;
  • The legislation states that the total payment may be limited to 2/5ths of a week’s pay; an employer may give more pay.

Excluded Individuals = Police, Armed forces, profit share fishermen. Category: Key HR Facts – Background

Guarantee Pay ~

The rates below are the statutory rates applicable to an employee being laid off or placed on short time working. Guarantee pay is not payable for any days on which you do any work even if much less than normal.

Maximum = £30  (£30) per day
Limit of 5 days pay in any 3 month rolling period i.e. maximum of £150
If your normal pay is less that £30 per day, you would be paid at your normal pay rate.

Conditions

  • You must have been employed continuously for at least one month;
  • Be willing to accept reasonable alternative work and remain available to work;
  • Your lay off or short time is not due to industrial action.

TIP – You should check your terms of employment for any clauses about a guarantee pay scheme as an employer may have his/her own guarantee pay scheme but the rate of pay must not be less than the statutory rate above.

Not paying guarantee pay counts as an unlawful deduction from your wages – you could make a claim to an employment tribunal if you are entitled to Guarantee Pay.


Exit Payments in the Public Sector ~

The cap of £95,000 on an exit payment made to an employee in the public sector is no longer applicable. An employee whose payment was affected adversely by the cap can request payment of the shortfall amount. That applies to payments made between 4th November 2020 and 12th February 2021 to which the cap was applied.

The sums deemed to be part of the cap do not include:  payments in lieu of holiday; Tribunal or Court awards; compensation payments for accident, injuries or illness. Some public employers are exempt such as Universities and FE Colleges.

The Treasury is likely to introduce measures to challenge exit payments that fall outside parameters yet to be established.