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By Money Management

Monday, February 9, 2009.

While very few people are immune from redundancy (the police being the obvious exception) it is important to know your rights so that, if the worst does happen, you are prepared.

Mark Cornish, an employment law specialist and partner at Anthony Gold Solicitors, says: "It's important for employees facing redundancy to understand what they can expect to receive. If they are being made redundant, then they are entitled to their notice money plus a redundancy payment."

Your redundancy arrangements should be included in your contract of employment. If you are about to be made redundant, your employer must inform you in good time and give you the reasons why.

For every year you have worked for your employer, you should get one week's notice, up to a maximum of 12 weeks. If you have completed more than one calendar month but less than one year, you are entitled to just one week's notice.

If you have worked for the same employer for two years or more, you are also entitled to statutory redundancy pay (SRP). The minimum amount that must be paid to someone who has been in employment for more than two years - as laid down by law - is half a week's pay for each completed year of employment up to the age of 22. This increases to one week's pay for those aged 22 to 41, and one and a half for those over 41 years of age.

"A week's pay is subject to a cap which is currently £330," says Cornish. "The maximum years of employment that will be taken into account when assessing the statutory redundancy payment is 20 years."

Of course, an employee can always challenge the fairness of their selection for redundancy or the processes used.

One point to bear in mind, he adds, is that redundancy payments are usually only made by solvent companies. "When an employer goes insolvent, there may not even be enough money available to pay wages, let alone a redundancy payment," he explains.

Some companies will offer better redundancy terms, such as severance payment. This could be a lump sum as compensation for ending your employment and must be above the statutory minimum. If you accept this, you could be asked to sign a legal document saying that you accept the sum and will not take any legal action against the employer in relation to your dismissal.

If such an offer is made to you and you do not know whether to sign, you should seek advice from your union, from ACAS or from an advice centre.

The first £30,000 of redundancy pay will be free from tax, but the rest, including unpaid wages and bonuses, may be taxed.

Remember that casual workers, including agency workers (who are not classed as employees) do not have any legal right to redundancy pay, even if they have worked for the same employer for two years or more.

Unfair dismissal?

If you are made redundant, but later discover your employer has hired someone else to do your job, do you have any grounds for appeal? This could be a situation facing many people over the next year or so. 

Martin Brewer, a solicitor at law firm Mills & Reeve, says that that by its very definition redundancy means an employer requires fewer people to do what work there is. However, he adds that it's entirely possible to have redundancies even if the workload is increasing - for example, if the employer organises the work differently.

"You would need to prove that it is your exact job they are doing in order to succeed in a claim for unfair dismissal," he explains. "It's often the case that redundancies lead to a change in the way an employer organises work, so a company might make 20 members of staff reduncant but need to recruit five more to take on a different type of work."

The law requires that vacancies should, in the first instance, be filled from those staff made redundant. This is because a fundamental step of a fair redundancy process is an offer of alternative employment.

"If you don't feel that you've been treated fairly then of course you can resort to an employment tribunal," Brewer adds.

If you want to make a claim for unfair dismissal then you need to have one year's continuous service. Brewer advises people seek out some initial legal advice before going down this route.

If you disagree with your employer about your entitlement to a redundancy payment, you can take the matter to an employment tribunal. Ask for form IT1 at a Jobcentre Plus office or phone the helpline on 0845 145 0004.


With thanks to Interactive Investors, owner of Money Management Magazine.


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