Employee Redundancy Rights

Being Selected for Redundancy

Redundancy selection must be objective and fair, avoiding any form of discrimination. Employers can base selection on criteria such as:

• Skills and qualifications
• Performance and productivity
• Attendance records (excluding absences due to parental or sick leave)
• Conduct and disciplinary records

However, employers must not use factors like age, gender, race, disability, or pregnancy as criteria for redundancy, as this constitutes unlawful discrimination. A transparent selection process helps minimise disputes. Employees should be consulted before any final decisions, providing an opportunity to understand the process and suggest alternatives. Failure to follow fair procedures can result in claims for unfair dismissal, so clarity and communication are essential throughout the process.

Statutory Redundancy Pay

Employees with two or more years of continuous service are entitled to statutory redundancy pay. The amount is calculated based on:

• Age of the employee
• Length of service (years of continuous employment)
• Weekly earnings (subject to a weekly cap set by the government)
• The calculation is as follows:
• Half a week’s pay for each full year under the age of 22
• One week’s pay for each full year between ages 22 and 40
• One and a half weeks’ pay for each full year aged 41 or over

For example, an employee aged 45 with 10 years of service could receive one and a half weeks’ pay for the five years they were over 41, and one week’s pay for the remaining five years. UK redundancy pay is a legal entitlement governed by the Employment Rights Act 1996. Factors like continuous service, age, and weekly pay determine the final amount.

Lay-offs and Short-Time Working

If an employer faces temporary downturns or reduced demand, they may choose to lay off employees or reduce their hours (short-time working). Employees laid off for four consecutive weeks, or for six weeks within a 13-week period, may have the right to claim redundancy. Employers should be clear about the duration of any lay-off or short-time working period and ensure that these options are used appropriately to avoid unnecessary redundancies.

Whistleblowing for Employees

Employees cannot be selected for redundancy as a form of retaliation for whistleblowing. If an employee reports misconduct or wrongdoing within the company, they are protected by law, and any redundancy selection related to whistleblowing can be challenged as unfair dismissal.

Disciplinary Procedures and Redundancy

If an employee is involved in a disciplinary process during the redundancy consultation, the two matters should be kept separate. Disciplinary procedures must be handled according to the company’s existing policies and should not influence redundancy decisions.

If the redundancy is viewed as a cover for dismissal due to misconduct, the employee could bring an unfair dismissal claim.

Employers must ensure that disciplinary issues are dealt with fairly, without impacting the redundancy process.

Tax and National Insurance

Redundancy payments are tax-free up to £30,000. Any amount exceeding this threshold is subject to income tax. However, no National Insurance contributions are due on redundancy payments. Employers must ensure the correct tax treatment for redundancy payments:

• Payments up to £30,000: No income tax or National Insurance
• Payments over £30,000: Income tax is payable on the excess amount, but no National Insurance is deducted

It’s essential for businesses to process these payments accurately to avoid legal or financial complications. PayEscape’s payroll software automates tax calculations, ensuring that employees receive the correct post-tax payment without errors.