Redundancy pay; have you been paid what you are owed?
Statutory & non statutory redundancy pay
Whilst many companies now only contractually pay the basic statutory rate of redundancy pay, some employees are entitled to non-statuary redundancy pay which is generally higher. Your entitlement and any qualifying conditions will be outlined in your contract. Remember, there are minimum legal requirements that an employer must fulfil; they can pay more but not less.
The statutory pay is dependent on length of service and your age at the time of being made redundant. You need to have been working at the company for more than two years to qualify for any redundancy pay.
Calculating your pay
Below is an outline of how statutory redundancy pay is calculated. If you work overtime or receive regular bonuses these are taken into account if you make a statutory claim through the Redundancy Payments Service (RPS) and may be taken into account by your employer. This will depend on your contract.
The statutory amount is paid in weekly increments, calculated based on your age and length of service up to the maximum amount paid by the government, which is currently £571 per week and capped at 20 weeks service.
• Up to and including age 21 you are entitled to half a week’s pay for every year worked
• From 22 to 40 you are entitled to one week‘s pay per years’ service
• If you are 41 or older you are entitled to one and a half weeks pay for each year
These amounts are cumulative, so if you have been employed for 25 full years and are aged 44 at the time of redundancy this would break down as follows:-
• 3 years at 1.5 weeks (max £2,549.50)
• 19 years at 1 week (max £10,849)
• 3 years at 0.5 week (max £856.50)
In the example above the total statutory redundancy amount would be a maximum of £14,275 (if your employer did not have a weeks service cap), but if it’s capped at 20 weeks it would be £12,276.50, as it counts back from your current age. Whatever your circumstances, the maximum statutory redundancy amount is £17,130. If you were made redundant before 6 April 2022, these amounts will be lower as the weekly pay was capped at a lower level.
Even if the company is insolvent you are still owed these redundancy amounts, if the administrator informs you that the company does not have the funds to pay your redundancy then this amount can be claimed from the Redundancy Payments Office (RPO) by filling in an RP1 form.
The RP1 form should be provided by the administrator, however if it isn’t, you can request one by calling the RPO on this number:- 0330 3310020
The government fact sheet that should be issued with the RP1 form can be downloaded from the link here covering everything in detail:- http://bit.ly/ZqFkoq
Redundancy payments up to £30,000 are tax free, this only covers the actual redundancy payment itself, notice pay and other benefits are likely to be taxable.
Independent tax advice should be sought as this is complex area of taxation