I previously looked at moving forward following redundancy, but I also wanted to address the financial impact of redundancy for employees as money worries and fear of not getting another job can have a significant impact on your health, both mental and physical.
Again, I would stress that taking control of the things you are able to control will be helpful in keeping you focused and not wasting your energy on those things you have no control over.
Before going into details about what you are entitled to financially, I want to clarify the employer’s responsibilities in a redundancy situation. It is the responsibility of employers to ensure that there is a genuine redundancy situation, employees receive the correct consultation period and that a fair selection process is followed.
For you personally, the first question you may have is whether you are eligible for redundancy payments and if so, how much you should receive. Generally speaking, if you have 2 or more years’ service with the company you should be eligible for a redundancy payment. You can use this link to check on the government website what redundancy pay you should receive Calculate your statutory redundancy pay – GOV.UK (www.gov.uk). You will see that redundancy payments are calculated on weekly salary. If you work different hours per week or receive commission payments as part of your normal salary, the weekly salary used to calculate your redundancy payment should be averaged over the previous 8/12 weeks prior to your redundancy date. I would point out here that some companies do provide their own company redundancy payments on top of statutory, but I have to say, a lot of companies are now more likely to give only statutory redundancy.
You should also receive the correct notice period which is (after two years’ service) a week for every full year’s service of employment with the company e.g. if you have worked for your employer for 6 years, you should receive 6 weeks’ notice but if you worked for your employer for 20 years, the statutory notice is 12 weeks as it is capped at this maximum. Some employers may offer pay in lieu of notice and this means your employment is terminated and you are not required to work your notice and are paid your notice. In order for your employer to be in a position to offer this, it should be stated in your contract of employment that this option is available. For some employees, this would be their preference as it can be difficult to continue to work for an employer in this situation. It also means you will receive your notice period in one payment but please note this will be subject to tax and NI unlike your redundancy payment which is paid as a lump sum and will not be subject to tax and NI contributions (usually up to £30,000).
You should also receive payment for any outstanding holiday. Your holiday accrual should be calculated up to your leave date and in the case where you are paid in lieu of notice, you should still receive the accrued amount of holiday up to the end of what would have been your normal notice period. During this year, it is likely that many employees have not taken much holiday but please be aware that in the unlikely event that you have used more holiday than you have accrued up to your leave date, this overpayment of holiday may be deducted from your final salary. Please also note holiday payments are subject to tax and NI contributions.
For those of you who have less than 2 years’ service unfortunately you will not be entitled to statutory redundancy payments but will be entitled to your correct notice period (as set out in your contract of employment) and also payment of any unused holiday.
If you have been affected by redundancy, this may be a good time to review your overall financial position. One way of doing this is by talking to an Independent Financial Adviser who should not charge you for an initial meeting and may help you to see your wider financial position and provide you with options.
I am happy to provide guidance or clarity you might need on the redundancy process and payments so please feel free to contact me.