Legal redundancy entitlements in the UK

Economically difficult times put employers under considerable pressure – often with reduced orders or soaring operating costs, they may find themselves with surplus staff resources, or an unaffordable salary burden. This seems very reasonable when considered objectively, but particularly when the job market is depressed, the prospect of redundancy can cause great distress to employees. Read on to learn more on legal redundancy entitlements in the UK.

It doesn’t necessarily mean that you’re going to lose your job

Employers are required to consult with the workforce prior to making redundancies. If more than 20 employees are to be made redundant, then it is treated as a collective redundancy, and special rules apply. If numbers are smaller, then employers may ask people to volunteer for redundancy. If no suitable volunteers come forward, then the employer will choose whom to lay off. They are also required to consider whether the employee could be redeployed somewhere else in the company, or whether there are found positions to apply for in associated companies.

Employee rights

The rights to fair reasons and not to be discriminated against, apply in this as in all other employment situations. The reasons why an individual employee is chosen for redundancy, must be fair and related to operational requirements and (within reason) the employee’s performance – it is not fair to select an employee on the basis of his or her sex, age, race or other discriminatory reason. In addition, employees are entitled to be given notice of redundancy – the rules vary depending on how long each employee has been with the company, but the average is one week’s notice for each year employed. Employees must be paid out in lieu of notice, if they are to leave immediately.

How much money will I get?

There is a prescribed statutory minimum for redundancy payments in the UK. Employees should always check their employment contracts, as they may be entitled to more, by agreement. Employers may also offer more either of their own volition, or as a consequence of union bargaining. Again, the statutory minimum entitlement changes depending on the duration of employment, but the average is the equivalent of one week’s salary for every year of employment.

Will tax and lost benefit entitlement make my payout worthless?

Whether voluntary or otherwise, you will be entitled to claim contribution based on job seekers' allowance after you’ve lost your job, if all conditions are met – such as, you’ve paid enough contributions and you’re immediately available for work. Most other benefits are means tested, so you may not be able to claim these, or may receive partial benefits, depending on the combined value of your payout and existing savings. Tax is only paid on redundancy payouts over a value of £30,000.