REDUNDANCY PAY – NEW RATE
The maximum weekly rate for Redundancy Pay has traditionally been increased each February and the current rate stands at £350.00.
Two changes have recently been announced regarding the next increase….
1. The maximum rate will increase to £380.00 per week
2. The increase will be effective from 1st October 2009.
The £380.00 rate will then be held until 1st February 2011.
How to Calculate Redundancy Pay
The amount of pay due is calculated in two steps.
Firstly, you determine how many weeks pay is due. This is based on the continuous employment and age of the employee at the end of their notice period. Periods of broken service do not count and only completed years of service qualify.
The calculation is based on the following age thresholds:
AGE & SERVICE PAY For Each Year in Age Group
Service up to 22nd birthday 0.5 week per year of service
Service from 22nd birthday to the 41st birthday 1 week per year of service
Service from 41st birthday onwards 1.5 weeks per year of service
A maximum of 20 years’ service can be taken into account so it follows that the maximum number of weeks’ pay that can be due is 30.
Step two takes the number of weeks and multiplies it by either the employee’s average pay for a normal week or the statutory maximum whichever is the lower amount.
Exclusions from Redundancy Pay
Under certain circumstances there is no entitlement to redundancy pay. For example, if the employee:
Has less than 2 years continuous service
Is dismissed on grounds of gross misconduct whilst under notice of dismissal on grounds of redundancy
Unreasonably refuses an offer of suitable alternative employment
Is on strike and then dismissed for redundancy (if, the notice of redundancy preceded the strike action the redundancy pay is due)
Is genuinely not an employee
This list is not exhaustive.
If you make an employee redundant, you are dismissing them. Consequently, you will be required to consult and in some situations you may be required to go through Collective Consultation. Normal unfair dismissal rights still apply for employees with 12 months service so before making an employee redundant, you should obtain advice on the correct procedure.
Sentient can be contacted on 08456 446 006.