Statutory Redundancy Payments

- by Becky Hall

Have you lost your job and wondering if their is any payment help available? You have come to the right place. Cashfloat explains in ‘Lost your Job’ guide all about the Statutory Redundancy Payments.

Lost Your Job? What Can You Do? – Chapter Three

How do Statutory Redundancy Payments work? - Cashfloat

If you are made redundant, your employer by law must pay Statutory Redundancy Payments. This is a minimum amount that your employer will give you as a financial safety net. This should prevent you from having to take out unsecured short term loans and falling into debt. Discover how much your statutory redundancy pay is with Cashfloat’s guide to job loss.

The History of Redundancy Payments

Before the Redundancy Payments Act of 1965, people who lost their jobs did not receive any statutory severance pay. The government introduced the Act as a safety net. After a qualifying period at work, but lost your job through no fault of your own, you would have a right to payment. The law designed it to help people pay for everyday expenses.

The act makes it a regulation for employers to provide ex-employees with a minimum amount of money to survive unemployment. It allows the employee to have a financial safety net to fall back if they didn’t find work straight away. Additionally, it would make employers think more carefully before making workers redundant.

There are three parts of employment law that forms the pillar of worker’s rights in the UK. They are:

  • The Contracts Of Employments Act
  • The Industrial Relations Act
  • The Redundancy Payments Act
Redundancy payments were designed to help people pay for everyday expenses - Cashfloat Redundancy payments were designed to help people pay for everyday expenses - Cashfloat

Statutory Redundancy Payment

If your employer advises you that your job is disappearing for one reason or another, it entitled you to some compensation. Provided that you have worked in the company for a minimum of two years, you can receive this compensation.

Statutory Redundancy Pay is the amount that is set down by law. You cannot receive payments less than the set amount. They are subject to change when the government introduces the annual financial budget. If you are working for a company as a contractor or a self-employed worker, then no statutory redundancy pay is applicable.

Most people who work for legitimate companies class as employees. However, there are some exceptions. Short term casual workers, self-employed, and agency workers regarding redundancy payments often also class as employees. However, an agency worker who is on a fixed term contract that is running for more than two years may class as an employee. Additonally, if the agency worker has continuous operating contracts, totalling up to more than two years, may also be considered for redundancy pay.

Certain occupations such as police officers and civil servants do not get statutory redundancy payments. But, they will get contractual redundancy pay. A check of the contract of employment will advise you about your rights to these payments.

Cick here to work out your payment

How is Statutory Redundancy Pay Calculated?

In some circumstances, you may not be entitled to statutory redundancy payments. Any employer who offers an alternative job that is suitable to your skills may lawfully retract statutory redundancy pay if you refuse the job offer. If you find a replacement job before your period of notice expires, it is possible to lose the statutory amount. However, in some cases, you still receive it.

Depending on your age, length of service and how much you earn, the amounts of statutory redundancy pay are set at certain levels:

  • An employee below the age of 22 is entitled to half a week’s pay for each complete year of employment.
  • Employees aged 22 to 40 will get a full week’s pay for each year of service.

Those over the age of 41 will receive a week and half of pay for each year that they have worked at the company. However, the government cap statutory redundancy pay at 20 years of service. There is also a weekly payment limit. This stipend currently stands at £525 per week* and the maximum statutory redundancy pay you can get is £15,750*. The figures use gross pay, not net pay.

Statutory redundancy pay is calculated using your age, number of  years worked and amount earned - Cashfloat

How Commission, Bonuses And Overtime Payments are Worked Out

If your work hours varied each week or month, then your payment will be based upon an average weekly pay. This payment will include commission payments or bonuses. However, it does not include some commission payments. It does include commission payments that use a definite factor, i.e. the number of letters that you write each week.

Payments do not include a commission based upon how successful you are at your job. For example, the number of insurance policies that you sell. The amount of commission due is worked out as an average over the 12 weeks before you got notice of redundancy. Unless your contract of employment includes overtime, it does not form part of the calculation for statutory redundancy payments.

What to do if your Employer Refuses to Pay Statutory Redundancy Payments

You can challenge failure by an employer, for any reason, to make a statutory redundancy payment. First, ask your employer for a written statement about why they have not paid you. You must ask for this within six months of leaving. If there is still no response to your request, then you can go to an Employment Tribunal and make a claim. The time limit for making a claim is three months from your dismissal. This applies whether you consider yourself unfairly dismissed or wish to claim discrimination.

The Redundancy Payments Act has been instrumental in preventing employers from hiring and firing employees at will. However, following the implementation of Brexit, employments laws that are mandatory for European Union countries could change.

Statutory Redundancy Pay FAQs

Is statutory redundancy pay taxable?

Statutory Redundancy payments do not attract the deduction of Income Tax. However, if the amount is over £30,000, there may be some tax to pay.

How should I claim statutory redundancy pay?

You do not need to claim Statutory Redundancy Payments. They are a right. Your employer is responsible for making the payment on the day you leave your job or very shortly after that. You are also entitled to a written statement confirming the amount and the method of calculation.

Where can I calculate my redundancy pay?

On gov.uk, you can calculate your redundancy pay using the statutory redundancy pay calculator. The calculation is based on age, weekly pay and the number of years in the job. You must have worked for at least 2 years at your employer in order to qualify.

If I changed from working full time to only part time a few weeks before being made redundant, how is the pay worked out?

Unfortunately, if you changed from full time to part time working hours before becoming redundant, then you receive the statutory amount for part time hours. Payments are calculated by what you earned at the time of redundancy.


Conclusion

Getting your statutory redundancy pay after being made redundant is often a life saver. Therefore, it is crucial you understand how the pay is worked out and know about any other benefits you may qualify for. Nobody should have to turn to instant payday loans for finance when they have lost their jobs. For more information and help when you have lost your job, read more chapters in our guide.


Want to apply for a jobseeker's allowance? Find you nearest Jobcentre Plus - Cashfloat Want to apply for a jobseeker's allowance? Find you nearest Jobcentre Plus - Cashfloat

*Correct as of October 2019.

Share
About The Author
Becky Hall
Becky never thought she would be a financial blogger. But Fate arranged that Becky had to put her accounting degree on the back burner right after she graduated with a first in Business and Accounting. While doing bookkeeping as a freelancer for private clients, Becky noticed how many cashflow problems can be solved with a little bit of education. Trying to keep her clients out of debt, Becky began writing resources which she distributed to clients. What began as writing advice for clients evolved into a passion and now Becky found her platform at Cashfloat. When she isn’t writing, calculating or budgeting, Becky can be found at her piano playing something classical.
Blog disclaimer

We do all we can to bring you interesting, practical and valuable information. However, please understand the following:

Information and data on this blog are for information purposes only. While we work hard to ensure it is accurate, we cannot accept responsibility for the accuracy, completeness, suitability or validity of any information provided on the blog. We will not be liable for any errors, omissions, losses, injuries or damages arising from its display or use. All information is provided with no warranties and confers no rights.

If you feel that any of the information published on our blog is not accurate, please notify us via email at compliance@cashfloat.co.uk

Cashfloat is rated 4.82 stars by Reviews.co.uk based on 601 merchant reviews

4.82 / 5 Rating
601 Reviews
Thank you cash flow very quick and easy application very helpful staff no hassle
Miss J
This has been very helpful to me and my family thank you
Anonymous
Zero hassle accepted me with bad credit file got me out of a right financial muddle thank you so much
Anonymous
Bottom content

Cashfloat is a trading style of Western Circle Limited - Company Registration Number: 7581337. We are fully authorised and regulated by The Financial Conduct Authority. FCA full permission license: 714479. ICO Registration Number: Z3305234


* Cashfloat terms and conditions apply. Applicants must be 18 or over. All loans are subject to affordability, applicant verification and traditional credit checks via various national databases by Cashfloat responsible lending policy. In most cases, loan decisions may take up to 30 minutes during office working hours. If your bank does not support Faster Payments, funds will be sent to your account the same day as approval so long as you’re approved by 16:30.


Representative example: Borrow £600 for 4 months, 4 monthly repayments of £247.68. Total repayment £990.71, interest rate p.a. (fixed) 270.10%. RAPR 997%.

Warning: Late repayment can cause you serious money problems. For help, go to moneyadviceservice.org.uk

This site uses cookies. Find out more.