Redundancy pay: What you need to know

Dealing with redundancy is never easy. 

However, getting your finances in order is an essential part of the process. Especially when it comes to finding how much money you’re entitled to, and claiming these funds before you move on. Not sure how much redundancy pay you could be owed?

Here’s a quick guide on redundancy pay – and how to check the amount you could be eligible for: 

 

What is redundancy pay?

Redundancy pay (also known as severance pay) is a sum of money that you may be able to claim if you’ve been made redundant.

The minimum amount you can claim is called ‘statutory redundancy pay’, but you may be entitled to more (this will be known as ‘contractual redundancy pay‘). So always check your contract to find further details.

 

How much redundancy pay am I entitled to?

You are entitled to redundancy pay if you have been with a company for two years or more. 

The actual amount you can claim will then vary, depending on your age, and how long you’ve been working for the business. 

For specific information about how much redundancy pay you are entitled to, you can use Directgov’s redundancy pay calculator.

 

How will my age affect my redundancy pay?

Statutory redundancy pay will be based on your age, and your length of service.

Here’s a rough guide to how much redundancy pay you can receive, based on your age:

 

Under 22 – You’ll receive half a week’s pay for each year of service

Between 22 and 40 – You’ll receive a week’s pay for each year of service  

Over 41 – You’ll receive a week and a half’s pay for each year of service

 

Each year of employment must be completed in full, in order to count towards your total.

There is also a maximum amount of redundancy pay you can receive. For 2020/21, this is capped at £16,140 (£16,800 in Northern Ireland). Regardless of your age, or length of service.

 

Are there any exceptions for redundancy pay?

There are a few instances where you may not be eligible to receive statutory redundancy pay.

Some notable examples of exceptions include if your employer decides to keep you on, or offers you suitable alternative work. Similarly, if you lose your job due to unsuitable conduct, you will not be ineligible for redundancy pay.

For a full list of exceptions, visit gov.uk/redundancy-your-rights

 

When will I receive my redundancy pay? 

You will generally receive your redundancy payment on the official date you’re scheduled to leave your role. However, you should be given written confirmation of the amount prior to this date – with an explanation of how it’s been calculated.

Your redundancy pay will then come through into the same account as your wages. 

 

What if the company goes out of business?

If the company has gone into administration, or has other financial difficulties meaning that they cannot afford the payment, you should still be able to receive the statutory redundancy payment, as well as pay for any outstanding holiday.

However, this may be made by the Redundancy Payments Office, rather than your employer.

 

How can reed.co.uk help if you’ve been made redundant?

We have a wide range of resources available on reed.co.uk to help you deal with redundancy.

Our redundancy cover letter template and redundancy cv template will help you get application ready, and know how to approach the topic with prospective employers.

We also have comprehensive guides on how to explain gaps in your CV, as well as an out of work checklist, which covers all the steps you need to go through when you lose your job.

And if you’re ready to find your next role, there are thousands of jobs added to reed.co.uk every single day. 

So whatever support you need, you can find it with us.  

 

 

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