In the United Kingdom, redundancy is a form of termination that happens when employers need to reduce their workforce. Commonly referred to as a “layoff” or “reduction in force” in the United States, UK employees who are being made redundant are entitled to certain benefits including redundancy pay, a notice period, time off to look for a new job, and more. Employees cannot be selected for redundancy due to age, gender, or disability. The redundancy process can be difficult to navigate, but this simple guide will explain what you need to know about redundancy and severance pay in the UK.
Who is Entitled to Redundancy Pay?
Employees facing redundancy are entitled to a severance or redundancy package from their employer. This will usually include a lump sum payment based on length of service and salary. Statutory redundancy payments are paid to employees with at least 2 years of service with the company and capped at 20 years of service. Redundancy payments are made according to age:
• Employees under 22 years old receive half a week’s pay for each year of employment
• Employees 22–40 years old receive one week’s pay for each year of employment
• Employees 41 and older receive one and a half week’s pay for each year of employment
What Are the Tax Implications of Redundancy Pay?
Termination payments include statutory redundancy pay, holiday pay, unpaid wages, and company benefits. Statutory redundancy pay under £30,000 is not taxable, but the employee is liable for paying tax and National Insurance on earnings which include unpaid wages, holiday pay, and bonuses.
How Do Employees Claim Redundancy Pay?
To claim redundancy pay, employees must have worked for the company for at least two years. To check eligibility, employees can confirm with their employer or an employment tribunal. Employees should receive a notice from the employer with details on how much redundancy pay they are entitled to. The employer must provide the written statement within 14 days of the termination.
What Are the Time Limits for Claiming Redundancy Pay?
The English law on redundancy and severance pay can be complex, and time limits can apply to certain claims. Employees facing redundancy must be aware of the claim time limits if they are entitled to redundancy pay. Most redundancy claims must be made within 14 days, but there are circumstances in which an employee may be able to make a late claim. For more information on redundancy pay, visit https://www.gov.uk/staff-redundant/redundancy-pay
Employment regulations in the UK can be challenging. If you are expanding in the UK or need to simplify your global HR and compliance, visit Global People Strategist to learn about statutory benefits, redundancy pay, employer requirements, and more.