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How to work out redundancy pay

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First4Lawyers, July 09, 2018

If you have been laid off from your job, you could be entitled to a lump-sum payment. This is called redundancy pay and can either be a statutory amount that’s outlined in law, or a contractual amount that’s explained in your employment contract.

The amount of statutory redundancy pay you could get is calculated based on three combined factors:

  1. How long you worked for your employer
  2. Your weekly pay
  3. Your age when you were employed

Whether you’ve been made redundant, or you want to prepare in case of redundancy, it’s helpful to know how much redundancy pay you can expect to receive.

This guide will help you understand the factors used to determine redundancy pay, and will help you work out what you are owed.

How is redundancy pay calculated?

Broadly speaking, redundancy pay is calculated by looking at the number of full years you worked for a company and your weekly pay.

Based on your age when you were employed, you’ll either be given half a week’s pay for every year worked, one week’s pay for every full year, or one and a half weeks’ pay.

If you were made redundant on or after 6 April 2017, your weekly pay is capped at £489 and the maximum statutory redundancy pay you can get is £14,670.

If you were made redundant before 6 April 2017, these amounts will be lower.

Length of service

If you’ve worked for your employer for two years or more, you’re entitled to redundancy pay. If not, they only legally owe you pay for your notice period.

You won’t be paid for a portion of a year served. So, for example, if you’ve work for your employer for two years and eight months, you’ll only be paid for the two years of service.

The time served is capped at 20 years – so even if you’ve worked somewhere for 25 years, you’ll only be paid redundancy for 20 years of service.

Weekly earnings

How much you get paid per week is key to how much redundancy you could receive.

If you’re paid monthly, whether that’s based on an hourly wage or a yearly salary, you’ll need to see what that works out to in terms of one week.

Dividing by four will give you a general figure, but dividing by 4.36 is a little more accurate as that’s closer to the number of weeks in a month.

Age

A big factor in your redundancy pay is your age.

  • For every year you worked under the age of 22, you’ll receive half a week’s wage.
  • For each year worked between 22 and 41 years old, you’ll receive one full week’s wage.
  • And finally, for every year worked over the age of 41, you’ll receive one and a half weeks’ wage.

So, if you’ve worked one year aged 21, and two years between the ages of 22 and 23, you’ll receive 2.5 weeks of pay.

When aren't you entitled to redundancy pay?

You will not be entitled to redundancy pay if:

  • You were offered a suitable alternative role
    If your employer offers you another job role or position, and it’s suitable to your skillset and experience, your redundancy package will be affected. Turning it down means your employer does not legally owe you any redundancy pay.

    If you start the new role, you’re entitled to a four-week trial period, which should be extended in case you need training. If you decide to hand in your notice during this four-week period because the role is clearly unsuitable for you, you will be eligible for redundancy pay.

  • Your employer has offered to keep you on 
    If there are a number of redundancies at your place of work, but your employer doesn’t make your role redundant, you can’t request to also be made redundant.

    Your employer may have their own policy in place for these types of voluntary redundancies, but if they offer to keep you on at the company, you are not owed anything legally.

  • Your career means you are not entitled to redundancy pay
    Former dock workers, share fishermen, crown servants, armed forces workers, members of the police service and apprentices are not eligible for redundancy pay. Although, in these cases, there may be other options.

    Domestic servants working for an immediate family member are also not eligible.

Need more advice about redundancies or employment law?

An employment law solicitor can provide you with the help you need during a redundancy dispute. Get in touch with one of our legal advisors for a free, no-obligation chat about your circumstances, and learn what your options are.

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Note: First4Lawyers offers this information as guidance, not advice. Before taking any action, you should seek professional assistance tailored to your personal circumstances.

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