Assuming an employee has over one month’s employment, they will be entitled to a minimum period of notice amounting to one week for each complete year of service, capped at 12 weeks’ notice if they have 12 years’ service or more.
The contract of employment may provide the employee with a more generous notice period. If the employee is not required to work their notice period, or to go on garden leave, then they may be entitled to receive a taxable payment in lieu of their notice period in a lump sum or in instalments.
Depending on the wording of their contract of employment, this may need to include a sum in lieu of the loss of any benefits, such as pension contributions and medical insurance, that would have been provided if they had worked their notice period.
The employee will always be entitled to receive a taxable payment after termination of employment for any accrued but untaken holiday up to the termination date. In addition, if they have over two years’ service, then they will also be entitled to receive statutory redundancy pay (SRP) calculated in accordance with the government calculator.
An employer may want to be more generous than the basic contractual entitlements set out above to assist the employee financially, improve morale among those remaining at work, and for overall goodwill. This might include an enhanced redundancy payment and, inclusive of any SRP, up to £30,000 should be able to be paid without deductions of income tax and employer and employee national insurance contributions. The employer may also offer to pay an external firm to provide helpful career coaching, often called outplacement, to assist the employee with their CV and interview skills. This is a tax-free benefit for both parties if the employee has over two years’ service.
Many employers pay a fair contribution towards the employee’s legal fees if they are being asked to sign a settlement agreement to receive any such enhanced package.
Employers could also suggest that the employee checks if they have mortgage protection insurance, because that can kick in on redundancy.
If pregnant staff are being made redundant, it is recommended that employers consider whether their employment can continue through their qualifying week, being the 15th week before the expected week of childbirth, to enable them to be eligible for statutory maternity pay, if they meet the other requirements for such pay.
Emma Clark is an employment partner at Keystone Law
