Making an employee redundant

Rights of redundant employees

Redundant employees have a number of rights, the main one being the right to receive a statutory redundancy payment (SRP).

The right to receive a SRP

To receive a SRP, an individual must:

• be an employee, ie partners, casual workers, agency workers, the self-employed and directors not working under a contract of employment do not qualify - see our guide on employment status
• have at least two years' continuous service - see our guide on continuous employment and employee rights
• have been dismissed, laid off or put on short-term working, ie those who opted for early retirement do not qualify - see the page in this guide on redundancy selection - non-compulsory

A redundant employee also has the right to receive a written statement setting out the amount of any redundancy payment and how you worked it out.

You must make the payment when or soon after you dismiss the employee.

How is a SRP calculated?

A SRP is based on:

• the employee's age
• the employee's amount of continuous service - up to a maximum of 20 years
• the employee's weekly pay

Use our interactive tool to calculate the statutory redundancy pay due to your employee.

Taxation of SRPs

As long as it's not more than £30,000, a SRP is not taxable. Any redundancy payment you make in addition to SRP is subject to tax and National Insurance (NI).

You must be careful however, when you are making other termination payments to the employee at the same time, eg a payment in lieu of notice and holiday, as you may have to deduct tax and NI for these.

Failure to make a SRP

An employee has six months from the date their employment ended to make a claim for payment to an employment tribunal where either:

• The employee disagrees with the amount of the payment, or
• You fail to make any SRP, eg because you think that the employee is not entitled to it. If they fail to make the claim in time, a tribunal still has the power for a further six months to decide whether or not the employee should receive a SRP.

However, they must have applied in writing to you for a payment within six months of their employment ending, or applied successfully to an employment tribunal within the six months after that.

Other redundancy rights

Employees under notice of redundancy also have the right to:

• Be offered alternative employment wherever possible.
• Have a trial period in the alternative employment without losing their right to an SRP.
• Reasonable time off on full pay for job-hunting or to arrange training.
• Not be unfairly selected for redundancy. Employees normally need at least one year's service to claim unfair dismissal. However, if an employee is selected for redundancy on certain grounds, their dismissal will be automatically unfair and they do not need a minimum amount of service.

For more information, see our page on automatically unfair reasons for dismissal in our guide on dismissal.

Subjects covered in this guide

• Introduction
• What is redundancy?
• What are lay-offs?
• What is short-time working?
• Avoiding redundancies
• Redundancy selection - non-compulsory
• Redundancy selection - compulsory
• The redundancy consultation process
• Rights of redundant employees
• How to help redundant employees
• Potential problems following redundancy
• Here's how we planned ahead to avoid making redundancies

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