The statutory redundancy payment scheme aims to ensure that people who are dismissed through no fault of their own receive compensation. Employees who meet certain requirements are statutorily entitled to a lump sum from their employer.
To be entitled to receive a statutory redundancy payment, an individual must:
- be an employee working under a contract of employment;
- have at least two years of continuous service; and
- have been dismissed, laid off or put on short-time working (and have a qualifying period of lay off).
When issuing redundancy pay, an employer must provide a statement showing how it was calculated.
The amount payable is dependent upon age, length of service and contractual earnings.
- Up to the age of 21: half a week’s pay for each completed year of service;
- 22 to 40 years of age: one week’s pay for each completed year of service;
- 41+ years of age: one-and-a-half weeks’ pay for each completed year of service.
The calculation for weekly pay is subject to the statutory limit of £566 (6 April 2021). This is reviewed annually.
The maximum number of years that can be taken into account in a redundancy payment calculation is 20.
More detailed information for employers and employees can be found in the links section below.