Redundancy – Consultation and Redundancy Pay

Editor’s Note: Updated 06/04/2022 – Pay or compensation rates are shown for the current tax year and figures in brackets for the previous year. Any figures in italics are yet to be confirmed.

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; there is no limit on the rate of pay;
–  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

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 £571 (£544) per week.
A maximum of the last 20 complete years of service can be counted.

The maximum statutory redundancy payment is £17,130  (£16,320) but most payments are smaller as to receive the maximum amount you will need to have 20 years continuous service from age 41 or over and your earnings would need to be £571 or more per week.  Hence the maximum payment of 20 weeks x 1.5 weeks x £571 = £17,130 (£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.

Gross pay is used for calculating an individual’s entitlement. That would also include the value of an employer’s contribution to a pension scheme which could result in a higher sum if it is within the weekly cap on gross pay

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

If an individual has been informed officially 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 and/or time off.

Excluded Individuals = Police, Armed forces, profit share fishermen.

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.