Being made redundant

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It’s the announcement you don’t want: your employer is no longer able to pay you and you’re being given the big heave-ho.

Redundancy means that your employer can no longer offer you work, either because they have run out of money or the work you do is no longer needed. You can’t be made redundant simply to get rid of you.

Redundancy can happen for a mixture of reasons.  These include:

  • Your company loses a big contract;
  • There is a fall in the demand of the product or service you offer;
  • Your organisation is relocating to another part of the country;
  • A change in technology means your skills are no longer required;
  • Your company has to cut costs to remain profitable.

Your rights if you are being made redundant

You are entitled to be told in writing that you will be made redundant, to have a meeting to discuss the redundancy, and then have the right to appeal if you think the redundancy is unfair. If more than 20 people are being made redundant at the same time, your employer should discuss the situation with a union or employee representative group prior to issuing redundancy notices.

You should be given the required notice for being dismissed, which is one week if you’ve been employed for one month but less than two years; two weeks for two years, three weeks for three years, and so on up to 12 weeks. 

Your employer should also give you reasonable time off to look for other work, including going for interviews. The amount of time allowed depends on the nature of work you do and how far you are prepared to look for that work; it may be worth agreeing with your employer what they see as reasonable.

You are still entitled to any holiday and statutory sick pay, even after you’ve been told you will be made redundant.

Redundancy pay

When you are made redundant you are entitled to redundancy pay, providing you meet the following criteria:

  • You’re an employee (being self-employed or a freelancer does not qualify);
  • You’re not a public service employee (e.g. you work for local government), as different rules apply;
  • Have worked for the employer continuously for at least two complete years (since the age of 16);
  • You’ve not reached the end of a fixed-term contract.

You will then receive statutory redundancy pay. This is the minimum you should get:

  • Half a week’s pay for every complete year you worked under the age of 22.
  • One week’s pay for every complete year you worked between the ages of 22-40 inclusive.

Your pay is calculated based on the gross (i.e. total before tax and national insurance) pay you receive per week at the time you were made redundant. Overtime won’t be counted unless you regularly receive it and it was compulsory. Commission should be included if it’s paid regularly. In cases of dispute, your weekly pay is based on an average over the proceeding 12 weeks (unless you’ve changed your employment terms during that time).

The maximum statutory redundancy pay you are entitled to is equivalent to £350 a week. In April 2009 it was announced that this amount will be raised to £380 a week. Redundancy pay of up to £30,000 is tax-free; although if you get more than £6,000 this can affect how much jobseekers allowance you are entitled to.

Alternative jobs

If there are other suitable jobs that you could do, your employer may offer these jobs to you. If you weren’t offered these jobs, you could claim for unfair dismissal. Each job needs to be appropriate to your skills, abilities and circumstances. It needs to be comparable with your current pay, status, hours and location.

You should be offered the job prior to your current job ending and be given information about what differences there are between the new job and your current role.

You can have a trial period of four weeks to find out whether the new job is suitable, without losing your rights to statutory redundancy pay. After this time, you can’t take redundancy.

You may lose your rights to redundancy pay if you don’t accept a suitable alternative job; however if the job is not suitable then you could claim unfair dismissal.

If you don’t get redundancy pay

Your redundancy pay should be automatically paid at the same time, or shortly after, you are made redundant. If your employer does not pay you the correct amount of redundancy pay then you should write to the employer first, and if they don’t pay you, you can take them to an employment tribunal.

Rules regarding redundancy are quite complex, so it’s worth contacting Advisory, Conciliation and Arbitration Service (Acas) on 08457 474747 or your local Citizens Advice Bureau.