Businesses have faced extraordinary change over the past few months and despite the government’s furlough scheme many employers have been forced to reduce the size of their workforce.
If you are facing redundancy or having to deal with redundancy in your business this is a guide to the minimum legal requirements.
Employees can be made redundant if their job no longer exists. This may be due to reduced business, a change in working practices or maybe even an increase in the use of technology. If workers have been employed for less than two years then there are no set procedures to follow, although the reason for redundancy and the choice of who to make redundant should still be fair.
Where employees have been employed for more than two years they are entitled to statutory redundancy pay and employers should follow a fair redundancy process that includes holding a meeting to discuss the reasons for redundancy and the procedure that will be followed.
As a minimum, employees must be given a paid notice period of one week for each year of employment over 2 years up to a maximum of 12 weeks and a leaving date should be agreed. Where employees are given a notice period which is shorter than the statutory minimum they must be paid in lieu of notice.
Employees who have been employed by the same employer for two years or more are entitled to statutory redundancy pay equivalent to 1 week for each year of employment after an employees 22nd birthday and 1.5 weeks pay for each year of employment after an employees 41st birthday. Payments are based on average weekly pay received in the 12 weeks prior to redundancy but are capped at £538 per week. The maximum total statutory redundancy pay is capped at £16,140. Where employees have been furloughed, average pay is based on the salary or wages they would have earned had they not been furloughed.
While pay in lieu of notice is subject to tax and national insurance, the first £30,000 of redundancy pay is not taxable.
If you want to know more about redundancy, what you are entitled to and the procedures that should be followed visit either https://www.gov.uk/staff-redundant or https://www.citizensadvice.org.uk/work/leaving-a-job/redundancy/check-if-your-redundancy-is-fair/fair-redundancy-process/
Clifton-Crick Sharp & Co Ltd