Covid-19 has made me Redundant

What payment should I accept?

As more and more redundancies are announced, many employees are needing to consider whether an offer of voluntary redundancy will be suitable for them. So what type of financial package should I be looking at?

First of all alongside the offer, you will need to check your employment contract, or your employment terms and conditions. Terms relating to redundancy may be in your employment contract that you signed on starting your position or could be contained in a policy or employee handbook that is standard for all employees to have. There could be terms relating to redundancy, or termination that will affect how your payment will be calculated or what your employer must pay you under contract for an enhanced redundancy package. However, there is a high chance that if contained in a policy, terms regarding redundancy may be discretionary, or allow the company a very wide ambit for each departing employee. 

Aside from these ‘extras’ that your employer may have agreed to pay you at the time of your hire, there are requirements under statute that set out the minimum that you must be paid during a redundancy.

A Statutory Redundancy payment

Statutory redundancy is calculated as 1 week’s pay for each full year worked when you’re between 22 and 41, half a week's pay for when you're under 22 and 1.5 weeks’ pay for each full year worked when you’re 41 or older. The weekly pay is capped at £538 (£560 in Northern Ireland) and length of service is capped at 20 years.

 You will not qualify for statutory redundancy if you have worked less than two years with this employer, or if you are offered a suitable alternative role and you refuse to take that role without a good reason. 

Holiday Pay

Your employer is required to pay you your accrued but untaken holiday pay. However, you will need to check your employment contract as clauses on termination may stipulate that your employer requests you take your holiday before termination. This could be if you are placed on garden leave and are not required to work anyway, or during your notice period.

Payment in Lieu of Notice

The general position regarding notice pay is that you are required to work for your period of notice and must be paid for it. Employers very often reserve the right in an employment contract to use discretion as to which employees must work for their period of notice and which employees may be terminated and paid out the sum of their salary for that notice period. A way to get a terminating employee out of the workplace immediately, so they cannot have access to company systems or databases for example, would be to terminate them immediately and to pay their notice pay as a lump sum and then this would end the employment contract quickly which may be a benefit for both parties. 

A Termination Payment or Settlement Sum

In addition to the above payments which employers are required to pay under statute, your employer may add a termination payment either because it is the policy of the company or as a gesture of goodwill. A redundancy policy may dictate that redundant employees qualify for a month's salary for each year of continuous employment with the company or something similar. However, a termination payment is often either negotiated with the employee or relative to the company’s current budget. That is the issue in the COVID-19 climate; senior employees who may have expected significant sums will likely be accepting smaller payments due to the uncertain economic situation.

Many redundancy payments will be negotiable however and we urge you to take legal advice if you are in any doubt of what you are entitled to or what is a fair settlement. Please contact A City Law Firm.