Redundancy Pay | How to calculate

Redundancy Pay 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 £544 per week, (from 6th April 2021) 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:

After one year of service, the weekly pay is multiplied by 0.5

For each year of service not below the age of 22, the weekly pay is multiplied by 1

For each year of service not below the age of 41, the weekly pay is multiplied by 1.5

Therefore the absolute maximum that can be awarded is 20 years at £544 x 1.5 = £16,320.

The employee must have two years' continuous service to qualify for this redundancy payment. However, if an employee has less than two years' continuous service an Employment Tribunal has discretion in certain circumstances to extend their period of continuous service to 2 years so that they can then qualify for redundancy pay.
 
The above calculations are for statutory redundancy pay; this is the minimum that must be paid under the law.
 
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 lot of people redundant.
 

Appeals Against Redundancy by Employees

Employment Law

 

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