Redundancy – what are you worth?

20 11 2008

In times where nobody is sure whether or not their job will be safe in the future, it is useful to know what your entitlements are should the worst happen. Statutory (legal) provisions are not the most generous, and consist of an entitlement to notice pay under your contract of employment, or a week for each year full year worked (to a maximum of 12 weeks), whichever is higher. This is payable in accordance with your normal salary amount.


In addition, you are entitled to a statutory redundancy payment of a week’s pay per  full year worked if you are over 22 years of age and under 41; 1.5 weeks’ pay per full year worked for each year you are 41 or over (if you’re under 22 it’s half a week’s pay). There is a limit of £330 which is applied to a week’s pay however, meaning that if you earn more than this, you will lose out. Also, you only get paid for full years worked – so if you have been with your employer for two years and eleven months, you will only be entitled to receive payment based on two years pay, not three.


Some companies will have a contractual redundancy scheme which will apply instead of the statutory entitlements, if the entitlements under the contract are greater. It will not, however, be paid in addition to statutory entitlements. The first £30,000 of a redundancy payment may be paid tax-free, as long as, generally, it does not encompass a payment in lieu of notice, which will usually be subject to the usual deductions for tax and national insurance.


Other companies will have a non-contractual enhanced redundancy scheme, which they offer employees in return for signing a ‘compromise agreement’, which essentially means that the employee agrees not to sue the company for unfair dismissal or any other claim arising out of their employment, in return for this enhanced payment. These agreements are not legally binding unless a qualified person (such as a solicitor) has signed the agreement to state that they have advised the employee on it. This is to ensure that employees are aware of all their legal rights and any employment claim they may be signing away before the agreement becomes binding.  If you need an independent solicitor to advise you on a compromise agreement, give me a call:  I can usually help. 




Please call me on 0207 464 8433 or

This article will appear in the “Docklands” and “Peninsula” newspapers week commencing 24th November 




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