Calculating Statutory Redundancy Pay
The statutory redundancy ready reckoner on gov.uk is very useful for employers and employees alike when calculating statutory redundancy pay. Employees qualify for statutory redundancy pay when they have worked for an employer for at least two years with the amount being based on three criteria:
- Age
- Weekly pay
- The number of complete years the employee was in their job
There are, however, a few pointers that are worth considering when you are calculating statutory redundancy pay.
The statutory minimum notice period is relevant
This is the minimum amount of notice employees are entitled to receive as a matter of law. The employer generally has to give one week’s notice for each year of employment up to a maximum of 12 weeks after 12 years.
Pay in lieu of notice
If you make an employee redundant and pay them in lieu of notice then they can add on what would have been their statutory minimum notice period to the length of service used to calculate their redundancy pay. If this period of time would mean that they would tip over to an additional complete year of employment then this additional year of service needs to be taken into account when looking at the redundancy payment due.
In a similar way, if you are paying in lieu of notice you also need to take account of any birthdays which might take place between the date of redundancy and the date when the employee’s statutory notice entitlement would have expired. The relevant age to input into the redundancy calculator would be the higher age which would have been reached by the end of the statutory minimum notice period.
Unpaid periods of employment
If your employees do not have normal working hours so your calculation of a week’s pay is based on a 12 week average, remember that any weeks where an employee was not paid must be discounted and you will need to look back further to put together an average of 12 weeks.
Here to Help
We always recommend that you consider your redundancy rationale and process before you start talking to your employees. This reduces the risk of making mistakes and potential complaints or claims from employees. If you need advice about making redundancies in your business, please get in touch with Richard Gvero, Joint Senior Partner and Head of Employment.
