How much redundancy money are you entitled to?

Redundancy need not be regarded as a terrible blight on your life; indeed, many people welcome their job being made redundant for a number of reasons. It gives them a chance to explore new possibilities in their career or life, or maybe just gives them a kick up the backside that they need. Sometimes it gives them a clean break from a company that is struggling. Also, of course, it gives them a nice slice of money which can pay the mortgage and maybe even pay it off.

Any company could make you redundant, from an SME to a global giant to a charity – so it’s worth knowing your entitlements.

How much redundancy pay am I entitled to?

Firstly, the bad news: if you’ve been an employee for less than two years there’s a strong likelihood that you won’t get anything. However, any period longer than this will result in a minimum payment that follows this schedule:

  • half a week’s pay for each full year you worked under the age of 22
  • one week’s pay for each full year between the ages of 22 and 41
  • one and half week’s pay for each full year worked above the age of 41

So, for example, let’s say you are 30 years of age and have been at a company for six years, with a weekly pay of £400 before tax. You are then entitled to £2,400 statutory redundancy payment – six multiplied by £400.

However, there are a few limitations as to what people can receive, because length of service is capped at 20 years and weekly pay is capped at £479, meaning that the maximum anyone can receive as statutory redundancy pay is £14,370.

However, that’s not the maximum you can receive from your company, merely the maximum the company has to pay as statutory. If an employee’s wages are high, or if they have been at a company for a longer period, they might receive a payout far higher than this. A CEO might receive more than £100,000, for example. Also, if a company might want a large number of workers to apply for redundancy they may offer better conditions, such as two or even three weeks’ pay for each full year worked.

Because of the special circumstance surrounding such payouts, you’ll only be taxed on any redundancy payment of more than £30,000 – and even if this tax has been removed by your employer before you receive it, it’s worth carrying out your own calculations to check the deduction was right.

When will I not receive it?

There are several circumstances in which you will not receive statutory redundancy – if your employer offers you relevant and suitable alternative work and you refuse it, for example.

It should also be noted that an employer has to follow a fair redundancy process of at least one individual meeting/consultation. You should also expect to be notified how people were chosen for redundancy, a timeline for the full process, and any possible alternatives. If more than 20 people are due to be made redundant, a union or employee representative should be involved in the process. If these procedures do not happen, there are strong grounds to appeal.