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Redundancy Round-up

View profile for Emma Allen
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The risk of redundancy can be very worrying at uncertain times. You might be told you’re at risk of redundancy if your employer has one or more jobs they cannot afford or no longer need. Whilst we are living during uncertain times, it is important to remember that during the coronavirus (COVID-19) pandemic, you have the same redundancy rights, including redundancy pay.

The rules within redundancies

Employers have freedom to choose who they make redundant, but there are still rules they have to follow. If you’re faced with redundancy, your employer must treat you fairly and act in accordance with your contract and legal redundancy rights. That includes making sure you’re consulted, following the right selection process and given your proper notice period. If not, then you could have a claim for unfair dismissal, or claim compensation for lack of consultation.

Redundancy pay

If you have been working for your employer for at least two years by the time you leave you should also get redundancy pay and paid time off to look for work.

The amount of redundancy pay you receive depends on your age, how long you've worked for your employer and your income. You might get more than the minimum amount the law says you should get, if it's in your employment contract.

Your employer should tell you when you'll get your redundancy pay. This should be no later than your final pay date, unless you both agree another date in writing. You should also be informed how you'll get paid, for example in your monthly pay or separate payments.

Payments up to £30,000 of redundancy pay is tax free. There are limits to how much redundancy pay you can get. You can only receive redundancy payments for up to 20 years of work. This means, for example, that if you've worked for your employer for 22 years you'll only get redundancy pay for 20 of those years.

The maximum weekly amount used to calculate redundancy pay is £538, even if your wage is more per week. Therefore, the maximum statutory redundancy pay you can get in total is £16,140.

Settlement Agreements

If your employer has not followed a fair procedure in selecting you for redundancy, they might sometimes ask you to sign an agreement stating that you’ll not go to an employment tribunal (often in return for an extra payment). This is known as a ‘settlement agreement’. Settlement agreements are voluntary and can be offered at any stage of an employment relationship.

Settlement agreements are legally binding contracts which can be used to end an employment relationship on agreed terms. They can also be used to resolve an ongoing workplace dispute, for example, a dispute over holiday pay. These agreements can be proposed by either an employer or an employee, although it will normally be the employer.

Once a valid settlement agreement has been signed, the employee will be unable to make an employment tribunal claim about any type of claim which is listed on the agreement.

For the settlement agreement to be legally binding, the agreement must be in writing. The employee must have received advice from a relevant independent adviser, such as a lawyer or a certified and authorised member of a trade union. Your employer must pay for you to receive independent legal advice so you fully understand the rights you’re giving up prior to signing the agreement. The independent adviser must have a current contract of insurance or professional indemnity covering the risk of a claim by the employee in respect of loss arising from the advice. The agreement must identify the adviser. Lastly, the agreement must state that the applicable statutory conditions regulating the settlement agreement have been met.

Employees should be given a reasonable amount of time to consider the proposed conditions of the agreement. The Code of Practice on settlement agreements specifies a minimum of 10 calendar days unless the parties agree otherwise.

Settlement agreements are voluntary and parties do not have to agree to them or enter into discussion about them. There can be a process of negotiation during which both sides make proposals and counter proposals until an agreement is reached or both parties decide no agreement can be reached.