7. Redundancy Payments
Statutory Redundancy Pay
If an employee is made redundant, and they have 2 or more years continuous employment, they will be due a redundancy payment. This will either be the amount due under statutory redundancy OR payments due under any enhanced company scheme (please check if your company has an enhanced redundancy payment scheme).
For current rates of statutory redundancy and how to calculate redundancy pay, visit the redundancy pay page in Employment Facts.
Statutory redundancy pay is not subject to tax or National Insurance contributions.
In addition to redundancy pay, an employee will be due contractual notice or statutory notice (whichever is the greater). Contractual notice is what is detailed in the employee's contract of employment. Statutory notice is the minimum notice that must be paid. You can either make a payment in lieu for this amount (or part of it) or you can require an employee to work their notice period and redundancy will be effective from the end of the notice period that has been worked.
Other Payments (e.g. holiday)
Employees will also be entitled to anything else under their contract of employment. For example, payment of any accrued but untaken holiday (depending on your contract, you could ask employees to take any outstanding holiday during their notice period).
If you have bonus schemes or other payments due under the contract of employment, these will also have to be paid.
Pay in lieu of Notice
If a payment in lieu of notice is made, then the contract will come to an end on the employee's last day of work. The notice period will be paid as a lump sum 'in lieu' of notice. Accrual of holiday will then stop, together will any other contractual rights. But please note that when calculating redundancies, you need to consider statutory notice periods in your calculations. Please see Redundancy and employment facts for more details.
Ideally you should have a PILON clause in the contract of employment to allow for this.