What is redundancy and what are my rights?

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By Kevin Peachey
Personal finance reporter

As the government's furlough scheme ends, some employers may decide they can't afford to keep paying all their staff.

What are your rights if you're made redundant?

What is redundancy?

When a business needs to reduce its workforce, it closes jobs, and the people doing those jobs are made redundant.

It's not the same as getting the sack.

If you are made redundant, you have a number of legal rights.

Who can be selected?

You must be chosen fairly.

Reasons not considered "fair" include:

  • Your age, race, gender, sexual orientation or religious belief

  • You are pregnant

  • You have been a whistle-blower

  • You are a member of a trade union

  • You have asked for holiday or maternity leave

If you are selected for any of these reasons, it could be classed as unfair dismissal.

Employers may make selections based on length of service (last in, first out) or disciplinary records.

Many firms ask for volunteers, and offer an enhanced redundancy payment.

But employers don't have to select volunteers.

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Could you be made redundant while on furlough?

Companies could make staff redundant while they were on furlough, as long as the employer wasn't still claiming government support for the role.

But the same rules of fairness applied.

Can your employer make you redundant on the spot?

No. The amount of notice you are given will depend on how long you have been employed:

  • At least one week's notice if you have been employed between one month and two years

  • One week's notice for each year if employed between two and 12 years

  • 12 weeks' notice if employed for 12 years or more

Anyone being made redundant is entitled to a consultation with their employer.

If an employer is cutting 20 or more jobs at any one time, it must organise a collective consultation involving a union or employee representative. This must start at least 30 days before anyone's job ends.

If 100 or more people are being made redundant, group meetings must start at least 45 days before anyone's job ends.

Even if a company is insolvent and is shutting down, there is still a consultation process.

What redundancy pay will you get?

If you've worked continuously for your employer for two years or more, you have the legal right to redundancy pay.

There is a statutory minimum, but some employers are more generous.

The amount depends on your age, length of continuous service, and current salary. You will get at least:

  • Half a week's pay for each full year worked when you're under 22

  • A week's pay for each full year worked when you're between 22 and 41

  • One and a half week's pay for each full year worked when you're 41 or older

An employer isn't obliged to pay you more than £16,320, or £16,980 in Northern Ireland.

The government has a redundancy calculator as does the Money and Pensions Service.

If you're still owed holiday when you leave, you're entitled to be paid for that too.

If a business has gone bust, then redundancy pay may be provided by the government.

Can you claim any benefits?

There are three main types of financial support you may be entitled to:

You might get a combination of these benefits, depending on your personal circumstances.

There are a number of free online benefits calculators from organisations including entitledto, Turn2Us, and Policy in Practice which can help you work out what you can claim.

Guides to redundancy

What happens to the tax I've paid?

The first £30,000 of any redundancy pay is tax-free.

This amount includes any non-cash benefits that form part of your redundancy package, such as a company car or computer. These will be given a cash value and added to your redundancy pay entitlement.

Any amount over that will be taxed.

At the end of the financial year (which runs from April to March) when you have been made redundant, it is worth checking whether you have paid too much or too little tax. This may depend on whether you have found another job.

What can I do to find another job?

You may be allowed paid time off to look for another job.

If you've worked continuously for your employer for at least two years, you're allowed to take 40% of your working week off - so two days of a five-day week - to attend interviews.

Your employer has to pay you for this time. If you take more time, they don't have to pay you, although some employers may be more generous.

Anyone retraining after being made redundant may also be entitled to grants, bursaries, loans, and free courses.

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