GeneralPayrollTAX For Individuals

Redundancy Pay

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If you are in the unfortunate position to be dismissed from you job, there are certain rights that you may be entitled to having been made redundant by your previous employer. The basic rights that you could be eligible to claim upon being made redundant are: -          Redundancy pay -          Notice period -          Option to move into a new and different job -          Time off to find a new (replacement) job. Firstly, what is redundancy pay? It is essentially a form of compensation that is paid to you when your job has disappeared. You may be entitled to redundancy pay from your employer but importantly, there are 2 forms:
  1. Statutory redundancy pay which is set down by law
  2. Contractual redundancy pay, which will be paid if it is written in your contract and there is a redundancy scheme in place where you work.
It is not possible to receive an amount less than the statutory redundancy pay that you are entitled to. If the contractual amount is less than the statutory amount, you will always be entitled to a minimum that is equal to the statutory amount. In order to normally qualify for statutory redundancy pay, you typically have to be an employee and work for your current employer for 2 or more years. If this does turn out to be the case, you will get: -          Half a week’s pay for each full year (if you are under 22) -          A week’s pay for each full year (if aged over 22 but younger than 41) -          1 and half week’s pay for each full year (if you are older than 41) One important thing to note for employers is that you cannot simply select some individuals for redundancy due to gender, age, race, disability etc. but you have to can only make an individual redundant in a fair way. If you do make an individual redundant due to age, race etc. this is deemed to be an unfair dismissal. With redundancy pay, you do not pay tax on a statutory redundancy payment if this is an amount less than £30,000. Any amount over this could potentially trigger a tax charge. You are advised to seek professional guidance/advice. If you would like more information about redundancy pay or how Wisteria could assist to help calculate whether you have received the correct amount of redundancy pay, please contact us on 020 8952 0140 or email [email protected] where a tax specialist will be more than happy to help answer any questions you have.

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