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How is statutory redundancy pay calculated?
A redundancy payment is based on 'a week's pay' and takes into account the employee's age and the number of years of employment.
To calculate a redundancy payment, the employer must first determine the period, ending with the relevant date (ie the date on which the notice of redundancy expires or the date on which the termination of employment takes effect if no notice is given), during which the employee has been continuously employed. It must then work backwards from the end of that period to calculate the number of complete years of employment falling within that period.
Finally, the employer must allow the appropriate amount for each of those years of employment. At present, where an employee is made redundant after the age of 64, the redundancy payment due is reduced by one-twelfth for every complete month that the employee is over the age of 64.
Employees dismissed by reason of redundancy at or after age 65, or at or after a lower normal retirement age, have no entitlement to a statutory redundancy payment. Service before the age of 18 does not currently count towards a statutory redundancy payment.
What effect will the age discrimination legislation have on the calculation of statutory redundancy payments?
The Employment Equality (Age) Regulations 2006 amend the Employment Rights Act 1996 to remove the upper age limit for entitlement to a statutory redundancy payment. Years of service under the age of 18 will also count towards entitlement.
While the provisions for tapering the award between age 64 and 65 will be removed, a maximum of 20 years' service will continue to count in calculating the award. Although the government had proposed to change the formula for calculating statutory redundancy payments by removing the age bands used, it recently announced that the current calculation method will be retained. In addition, the two-year continuous employment qualifying requirement is to remain.
If an employee has been given notice of redundancy and wants to leave before the end of the notice period to take up a new job, will this affect their right to a statutory redundancy payment?
The answer depends on whether or not the employer objects to the employee's premature departure. If the employee gives written notice to terminate their employment on a date earlier than the original termination date given by the employer, they will no