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Weekly UpdatesThis checklist is designed as a guide for those working out their redundancy package. Since regulations in this area are subject to change, you are advised to seek professional advice.
Management Standards
This checklist has relevance to the MSC National Occupational Standards for Management: Key Role C--Manage People.
Definition
In broad terms, a job is redundant if:
* your employers are ceasing to carry on the business which employs you
* your employers are closing down the business at the site where you work, eg if a company with four distribution centres decides to close one down
* your employers are transferring the business from the site where you work to another location, eg a company with two offices decides to rationalise on to one site
* your employers need fewer employees to do your particular kind of work, eg they decide to have one manager responsible for sales instead of two
* your employers need fewer employees to do your particular kind of work at the place where you work, eg the divisional personnel function is closed but the head office personnel function remains and a personnel manager is appointed for each site.
The basic test of redundancy is whether your employers now need fewer employees, either across the company or at a particular location. In theory the amount of work need not have changed but it must be capable of being done by fewer people.
Action checklist
1. Check eligibility
To be eligible for the statutory minimum redundancy payment you must meet all the following criteria:
* be employed under a contract of service (ie not self employed)
* be under the normal retirement age in the company for the kind of role, or if there is no normal retirement age, be under 65
* have at least two years' service with the current employers, including any employment with associated employers. (Years before age 18 do not count).
Certain groups of employees are excluded from statutory redundancy pay, for example those who normally work overseas (even if their employers are based in the United Kingdom). Also, case law has established that employees who volunteer for early retirement in a redundancy situation may be ineligible for redundancy pay.
2. Calculate your payment
The amount of the payment is calculated in relation to age, length of service and "a week's pay".
If you are paid an annual salary a week's pay will be 1/52nd of your current annual salary. There is an upper limit on "a week's pay" which is revised each year. The current (April 1998) figure (February 2001) is 240 [pounds sterling], making the maximum statutory payment 7200 [pounds sterling]. The formula for arriving at this is 20 (years) x 1.5 (weeks) x 240 [pounds sterling]. The maximum length of service which can be taken into account in a redundancy pay claim is 20 years. This means that if you earn more than 240 [pounds sterling], then your redundancy pay will be calculated as if you earned 240 [pounds sterling] per week. Benefits such as company cars do not count.
Employers must give a statement setting out how redundancy payment has been calculated. A ready reckoner which will help you to calculate the number of weeks' pay due is contained within the DTI publication--Redundancy Payments PL808.
Of course, many redundancy payments are substantially in excess of the statutory minimum. However, payments often preserve the age/service bias of the statutory payment in some form.
3. Negotiate your package
Explore the possibility of negotiating. Many packages may be increased because of individuals negotiating for additional benefits such as:
* car
* outplacement support
* career counselling
* access to secretarial facilities
* health insurance.
It may also be possible to negotiate an additional lump sum payment if the circumstances of the termination of your employment indicate the possibility of a claim for compensation for unfair dismissal (see 6 below).
4. Tax position
Traditionally the first 30,000 [pounds sterling] of all payments received was tax free. However, the Inland Revenue is now much harsher on which payments actually qualify for this exemption and professional advice should be sought. Statutory redundancy payments are tax free, but may have to be included within the 30,000 [pounds sterling] exemption limit. Contact your local Tax Office for further information.
Any payments over 30,000 [pounds sterling] will be taxable in full. The most substantial payment people normally receive is salary in lieu of notice and this is taxable.
Those who feel they have been taxed unfairly can challenge the decision with their employers or the Tax Office.
5. Employers' responsibilities
If you are made redundant, there is no need for you to put in a claim for redundancy pay as it is your employer's responsibility to calculate it and make payment. If, however, you do not receive the redundancy pay to which you think you are entitled, you should make a written request to your employer, or alternatively you may make a claim to an Industrial Tribunal. You must make any such claims within 6 months of the date of the termination of your employment.
6. Unfair dismissal
True redundancy is a fair reason for dismissal but there are a number of circumstances in which an employee who is made redundant can sue for unfair dismissal, eg where someone other than you should have been selected for redundancy. If you feel that you have a case seek legal advice.
Dos and don'ts for working out your redundancy package
Do
* Seek professional advice.
* Negotiate for additional benefits.
* Understand the tax implications of your package.
Don't
* Automatically accept the first offer.
Useful reading
Books and leaflets
Useful addresses
Related checklists
* Redundancy: the next day
Thought starters
* Be prepared to bargain--employers are sometimes far more generous than you would expect.
* Some settlements may not be as attractive as they seem--seek advice.
Further Information
Checklists are available in the following formats:
* Individual checklists.
* A complete set of 1975 on CD-ROM or in hard copy.
* Checklists with permission to photocopy.
Full details of the range of checklists available can be obtained from:
Lavis Marketing, 73 Lime Walk, Headington, Oxford, OX3 7AD Tel: 0845 702 3736 (local rate call) Fax: + 44 1865 750079 or from Checkpoint on the Chartered Management Institute's website at www.managers.org.uk
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