This is calculated by taking the employee's age, years of service and average weekly pay to arrive at a figure.
However, the weekly pay is limited to a maximum of £330 per week and the maximum years that will be considered is 20. However, the years of service also depend upon the age of the employee.
This is how it is calculated in detail:
Years of service up to the age of 21, the employee's weekly pay is multiplied by 0.5 for each completed year of service.
Years of service between 22 and 40, the employee's weekly pay is multiplied by 1
Years of service from 41 onwards, the employee's weekly pay is multiplied by 1.5
Therefore the absolute maximum that can be awarded is:
20 years at £330 x 1.5 = £9,900.
The employee must have 2 years' continuous service to qualify for this redundancy payment. However, if an employee has less than 2 years' continuous service an Employment Tribunal has a discretion in certain circumstances to extend their period of continuous service to 2 years so that they can then qualify for redundancy pay.
Contracts
Employees may have redundancy terms stated in their contracts or the employer may already have an agreed redundancy procedure.
These will usually be more generous than the minimum stated by law.
The only problem with these is that the employer may want to exclude employees from these schemes to lower the cost of redundancy.
Especially if the employer has to make a large amount of people redundant.
