Redundancy Pay

Will I get Redundancy Pay? If you have been an employee (not a casual worker or a contractor) of a company for more than two years then you will at least be entitled to the Statutory Redundancy Pay (SRP) even if the employer makes no other provision. The minimum notice will be 1 week for each year of service up to a maximum of 12 weeks.

How much will it be? Statutory Redundancy pay depends not only on how long you have been working for the employer but also how old you are. Assuming you have qualified for SRP, you will receive the following:-

For employment whilst under the age of 22 you will receive;-
½ a week’s wages for each year with the employer
For employment whilst between the age of 21 and 41 you will receive;-
1 week’s wages for each year with the employer
For employment whilst age 41 or over you will receive;-
1½ week’s wages for each year with the employer

Some points of note:-

The MAXIMUM allowed per week is £380 even if you used to earn more
The MAXIMUM continuous service counted is 20 years
Earnings are averaged over the12 weeks before the “calculation date”
Commission earnings may be included
Non regular overtime is not included

Will it be taxed? The common understanding of “Up to £30,000 is tax free” is NOT necessarily the case. It depends entirely on what payments are being made in respect of. A brief summary is shown:

Tax Free
Statutory Redundancy Payments
Golden Handshake (up to “£30K rule”)
Taxable
Unused Holiday Payments
“Gardening Leave” (not required at the office)
Some payments in lieu of notice
Any payments in excess of the £30K limit

Remember in some cases national insurance may also be payable. If you are in any doubt you should always check with your tax office.

Is there room for manoeuvre? If you are receiving a sizeable payment that could be taxable, then it may be well worth considering asking your employer if part of the money can be used to boost your pension so that you will at least get the tax back.

If you are a higher rate tax payer, it might be advantageous to see if they will pay you after you receive your P45 as they will then only deduct tax at the lower rate and it can stay in your account for a while before you have to pay the extra to the taxman.

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