Redundancy payments and notice
Employees may be entitled to redundancy payments if they have been continuously employed for at least 2 years and are dismissed due to one of the following possible reasons for redundancy:
- closure of a business
- closure of the employee's workplace
- a diminishing need for employees to do the available work.
If you have no contractually-enhanced redundancy pay arrangements, all your employees with at least two years' continuous employment get a statutory redundancy pay entitlement of:
- 0.5 week's pay for each full year of service while they were under 22
- 1 week's pay for each full year of service while they were 22 or older, but under 41
- 1.5 week's pay for each full year of service while they were 41 or older.
Employees can only count a maximum of 20 years' service and the 'weekly pay' is subject to an upper limit.
The statutory redundancy payment is capped at £464 a week. From 6 April 2015 the payment cap will increase to £475 a week.
If you have cash-flow problems so serious that making the redundancy payment would put the future of your business at serious risk, the Redundancy Payments Service (RPS) can arrange to pay the employee direct from the National Insurance Fund. If you are insolvent, the RPS makes the payment and the debt is recovered from the assets of your business.
Employees who are selected for redundancy must be given a notice period before their employment ends. The statutory notice periods are:
- at least one week's notice if the employee has been employed between one month and two years
- one weeks notice for each year of employment between two years and 12 years
- 12 weeks notice for someone who has been employed for 12 or more years.