Help with the issue of redundancy.
Redundancy is a huge topic and a situation that neither employers nor employees would like to find themselves facing. It can be an inevitable event that employers can predict, or it can be an overnight issue where employers suddenly find themselves with no option other than to make a position redundant.
It can affect every type of business, ranging from small employers right through to well established companies, as has happened very recently with the News of the World newspaper; a business originally started in the 1800s.
Although redundancy is a delicate subject for many people, it is an area than many people have questions about. If you are faced with making someone redundant, you may find the points below of use.
Statutory redundancy is payable to any member of staff who has been employed for two or more years of continuous service. It is usual for redundancy payment not to be taxable, up to the first £30,000, whereas a lieu of notice payment, a payment made to cover the notice period, is usually taxable. (Pay in lieu of notice is money paid to you by your employer as an alternative to being given your full notice.)
The amount payable depends on two things; the length of service and employee age. A member of staff who has worked for the same employer for 5 years and is age 30 would receive 5 weeks of statutory redundancy pay, whereas a 50 year old employee who has worked for the same duration would receive 7.5 weeks. There is a useful online tool for calculating redundancy amounts here – Direct.gov.uk/redundancy
Once an employer has notified an employee of redundancy, the employer can allow the employee a reasonable amount of time off work to seek new employment.
From February 1st 2011, the maximum weekly pay when calculating redundancy pay £400 per week. If an employee earns more than £400 per week then their redundancy calculation is limited to £400.
Employers should pay the employee’s redundancy amount at the time they are dismissed, or very shortly after. Any delay in providing the redundancy pay may give the employee the right to proceed with tribunal proceedings.
The employer must also provide you with a written statement showing how the payment has been calculated at or before the time it is paid.
Allan Pearson, director of bureau services and HR at PAYEpeople, says “Redundancy can be a complicated matter and as such needs to be correctly handled. Many employers tend to outsource their payroll to a payroll bureau, to ensure essential items like redundancy payments are calculated and paid correctly. The last thing an employer needs is an unhappy employee, especially at such a delicate time.”
For further information relating to redundancy, or for questions relating to employment in general, please visit our website.
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