Redundancy - Employee

If you have recently been made redundant, or your employer has indicated that your position is at risk of redundancy, we can help.

Will I receive a redundancy payment?

You will be entitled to receive a redundancy payment if:

·         You are working as an employee (i.e. not on a self-employed basis or as a member of a partnership). Directors may be employees if they work under a contract of employment provided they do not have a controlling interest in the company; and

·       you are over the age of 20 and will have at least two years continuous service on the date the dismissal takes effect; and

·      you are made redundant or accept voluntary redundancy
 

What payments will I receive?
 

(1)   Redundancy pay

Statutory redundancy payments are based upon your age, gross weekly salary (subject to a cap which is set each year) and length of service.

Many employers will however offer to pay more generous redundancy terms either under a contractual scheme or on a discretionary basis in which case you might be asked to sign a compromise agreement.

(2)   Notice pay

The period of notice that you are entitled to is normally set out in your contract of employment. In the absence of a contractual provision, the law sets out a statutory minimum period of one weeks notice for up to two years service, and then one week for every complete year worked up to a maximum of twelve weeks. Depending on your seniority, it is sometime possible where there is no written agreement to negotiate a period in excess of the statutory minimum on the basis of what is “reasonable” for that particular position.

Often employers are willing to make a payment in lieu of notice as part of the redundancy package and, subject to the terms of any written contract and certain Inland Revenue concessions, this can often be negotiated to be paid without deduction of tax.

See also our guide to wrongful dismissal for detail of other elements that can be included when assessing notice pay.

(1)   Bonus payments

If you are made redundant shortly before a bonus payment falls due you may still be entitled to receive a payment under the scheme. Where the scheme forms part of your contract there is often an entitlement to receive a payment, albeit possibly on a pro rata basis if the dismissal falls before the year-end. If the bonus scheme is discretionary, the position is more difficult. However recent cases have placed some limits on employer’s discretion to avoid payments and it is therefore often possible to negotiate a settlement, especially if your employer has a track record of having paid out bonuses in similar circumstances to your own.

Often it is possible to negotiate a global severance package with your employer, especially where there are question marks over the validity of the redundancy. Employers are usually keen to settle where this is the case. Professional advice should preferably be sought in connection with such negotiations, and is essential where you are asked to sign a compromise agreement setting out the terms on which you are being made redundant.