Redundancy can happen for many reasons and if you’ve been made redundant, or if you are about to, it can cause serious financial issues.
Along with re-evaluating your finances and planning your next career move, it’s also important to make sure you know your rights as your employer must treat your fairly and follow your legal rights.
This includes following the correct protocol so you are consulted, given the proper notice period and paid any redundancy money due.
Playing ball? Your employer needs to follow certain rules when making people redundant
You may also be given help finding a new position, the option to move into a different job in the same company, and time off to find a new job.
But if your employer doesn’t play ball and isn’t acting legally and following the law, you may be able to claim for unfair dismissal or claim compensation for lack of consultation.
Here we’ve outlined the most important things to be aware of when looking at redundancy, your rights, and where to go next to get free help and advice.
When you can and can’t be chosen for redundancy
When an employer chooses people to make redundant, this has to be for a fair reason. For example, the reason given needs to be something measurable, such as a disciplinary record, timekeeping or your performance.
Employers can also ask for volunteers, look at staff appraisal scores and use disciplinary records when picking people for redundancy.
If a whole department and all the employees within it are closed down, the firm won’t have to go through a selection process.
There are a number of reasons which can’t be used for being chosen for redundancy including; gender, marital status, sexual orientation, race and age.
If you think you’ve been unfairly dismissed you can appeal the decision by contacting your employer and explaining why this is the case. If it isn’t resolved you may need to make a claim to an employment tribunal.
Your redundancy payout depends on how long you’ve worked for the company
Most employers will be entitled to statutory redundancy pay if they’ve been working for the employer for two years or more. The amount you get depends on your age and how long you’ve been working at the company.
If you’re made redundant unfairly you may be able to claim for unfair dismissal
This is measured as half a week’s pay for each full year worked when you were under the age of 22, one week’s pay for each full year when you were aged 22 or older but under 41, and one and a half week’s pay for each full year worked when you were aged 41 or older.
This is capped at a maximum of 20 years and the first £30,000 is tax-free, with the rest taxed at your normal rate.
If made redundant on or after 6 April 2018 the week’s pay figure is capped at £508 and the maximum statutory pay you can get is £15,240. Before this date the amounts will be lower so check with your employer or check on the Gov.uk calculator.
Your employer may have its own redundancy payment scheme, which is more generous that the statutory allowance, so make sure you know what this is – if it’s not outlined in your contract the HR or finance department should have this information.
The amount of money you are due will depend on your employer and how long you’ve worked
You will also be paid for any holiday you have accrued and during your notice period you will also get paid. The amount of notice given will depend on your contract and the amount of time you’ve been with the company.
There needs to be a consultation before you are made redundant
You have the right to a consultation before you are made redundant and this involves a meeting with your employer to find out why it’s happening and also to give you the option of any alternatives, such as another role at the company.
A notice period must be given before you have to leave
Your employer needs to give you a notice period before your employment contract ends and this will either be the statutory minimum or you may have a different period set out in your contract.
The statutory periods are at least one week’s notice if you’ve been employed for between one month and two years, one week’s notice for each year if you’ve been working there between two and 12 years, and then 12 weeks’ notice if you’ve been employed for 12 years or more.
When a company goes bust, its employees can still get redundancy payments
If your employer has become insolvent then it will either be in administration and there will be administrators trying to keep the company stable, in liquidation, whereby it has closed and its assets are being used to pay people it owes, or it may have made a voluntary agreement with it creditors.
Whatever the case, any money you are owed will usually be claimed back through the insolvency firm. It may be the case that you’re asked to carry on working and this won’t affect your rights to redundancy if it closes down at a later point.
If it does shut up shop you will be given a payment by the government for any money owed to you. There are no guarantees you’ll be paid everything you’re owed but you can claim for; statutory notice pay, redundancy, up to eight weeks of wages, up to six weeks of holiday pay, pension contributions – if they haven’t been paid to you – and a basic award for unfair dismissal.
There’s £508 per week available for each claim, so if you put in a claim for redundancy money and notice payments, for example, you could get two payments of up to £508. You can make a claim online for redundancy, statutory notice pay and any other monies owed on the Gov.uk website.
The Insolvency Service also provides free help and advice to those in this situation and you can contact them on 0300 678 0015.
The first £30,000 paid out for redundancy is tax free
Up to £30,000 of your redundancy payment is tax free, however, all other payments such as for holiday pay, payments given instead of a notice period, any wages you are due and any bonus payments owed will all be taxed at your normal rate.
This is because they do not count as tax-free redundancy pay and both tax and National Insurance contributions will be taken from them as usual before you get them.
The amount of tax you have to pay is calculated by looking at how much you earn over a year. Therefore if you haven’t worked a full year, you stopped working part way through for example, you may have paid too much tax.
If this is the case, contact HM Revenue & Customs and let it know. If you need to pay extra tax you may need to complete a Self-Assessment tax return at the end of the year.
If you’ve worked for two years or more you will be allowed time off to find a new job
You are allowed some time off to look for a new job if you’ve worked continuously for two years or more on the date your notice period starts.
However, the most your employer has to pay you during this time (how much time you take depends on your circumstances), is 40 per cent of one week’s pay.
You must be given a notice period and this will be calculated based on how long you’ve worked
There is free help available for those facing redundancy
There are a number of charities and organisations which offer free help, advice and legal support to those facing redundancy or those looking for a new job.
The Advisory, Conciliation and Arbitration Service (ACAS) offer free help on all employment issues while your local Citizens Advice Bureau and the charities StepChange and Turn2Us can also help.
If you’re made redundant you may be entitled to benefits
Your circumstances may have changed after being made redundant and therefore you may now be eligible for benefits.
The main benefit for those not in employment is the jobseeker’s allowance but there are also a number of other benefits you could apply for.
For an idea of what you could apply for, check an online benefits calculator – such as that from Entitledto.