How much is redundancy pay? Employment Law

If you are being made redundant by your employer, it is possible that you might be entitled to redundancy pay. There are two types of redundancy pay: statutory redundancy pay, and non-statutory redundancy pay.

Statutory redundancy pay relates to the amount of money an employer is legally required to give you if you meet the qualifying conditions. Non-statutory redundancy pay (also known as contractual redundancy pay) is the redundancy terms that are chosen by and built into your contract by the employer.

A person who is being made redundant will only be entitled to either statutory redundancy pay or non-statutory redundancy pay – not both but the contractual entitlement will include the statutory amount.

How much is statutory redundancy pay?

Employees who have worked for their current employer for 2 years or more are entitled to:

  • Half a week’s a pay for each full year they were under 22;
  • One week’s pay for each full year they were 22 or older, but under 41;
  • One and half week’s pay for each full year they were 41 or older.

The maximum length of service for redundancy pay is capped at 20 years.

Weekly pay is calculated as the average wage earned by the employee per week in the 12 weeks before the day they were given their redundancy notice. If an employee is made redundant on or after 6th April 2020 the maximum statutory redundancy pay they can get is £16,140.

Employees who do not meet the above criteria are not entitled to statutory redundancy pay. Further to this, if, during the consultation process, the employer identifies suitable alternative work that the employee rejects for no good reason, they are not entitled to statutory redundancy pay and are effectively resigning.

How much is non-statutory redundancy pay?

Non-statutory redundancy pay is set by the employer. Therefore, there is no standardised amount or criteria. Non-statutory redundancy packages are usually more generous than statutory packages.

Is redundancy pay taxable?

Redundancy pay up to £30,000 is not taxable. If, upon redundancy, any outstanding wages or holiday pay is due, normal tax deductions and National Insurance contributions will be taken from this.

How much redundancy pay am I entitled to if I was furloughed?

If an employee is made redundant and was furloughed, their redundancy pay should be based on what they earned normally prior to being furloughed.

Help & Support from Beswicks Legal

If you are an employee facing redundancy, or an employer with a query regarding statutory or non-statutory redundancy packages, our team can help. At Beswicks Legal our specialist team of employment law experts are on hand to support you in taking your next steps. Get in touch today to talk to us.

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