Redundancy after change in contract terms

seanmoody

Hello Payrollers,
I'm looking for some advice on calculating the weekly pay in relation to redundancy.
If someone with say 30 years continuous service reduces their hours from FTE 1 to FTE 0.5 and is then made redundant say 2 months later it would seem unfair to calculate the statutory redundancy payment on FTE 0.5 as this would halve the payment. Is there a ruling somewhere to protect such employees so that the weekly pay is calculated over the last 3 years similar to pension schemes?
I've just spoken to the Redundancy Helpline 0845 145 0004 and they bluntly stated that we use the lower amount.
Look forward to hearing from you. Sean.

Ian Congreave

Sean, I'm afraid that the Redundancy Helpline is, in principle, correct. There is no statutory provision for calculating the amount of statutory redundancy pay (SRP) over an extended period.

However, there are a couple of points to make. First, SRP is calculated by multiplying a number of weeks, based on length of service, by the employee's "week's pay". How a week's pay is calculated depends on whether the employee is paid the same each week or whether the pay varies because of shift working or bonus or commission payments (but not overtime). In the latter situation, a 12-week average is used. That may have an impact on the calculation for your employee. See the FAQ at http://www.paypershop.com/news-cat/payrolltips182.html.

The second point is that employers may top-up the SRP by an additional payment of "enhanced redundancy pay" (ERP). For example, you could pay the SRP, with the calculation based on the current rate of pay, and then pay ERP of the same amount. ERP qualifies for the same tax exemption as SRP - it is not taxable to the extent that, together with any other qualifying termination payments, it does not exceed �30,000, and there is no liability for NICs.

The only other issue with ERP is that it must meet age discrimination rules. It must be calculated in the same way as SRP but may be increased by (1) increasing the weekly statutory limit, or (2) multiplying the number of weeks used in calculating SRP (i.e. the �, 1 and 1� weeks) by a factor of more than one, or (3) multiplying the final figure by a factor of more than 1. There will be more information about ERPs in next week's PayPerShop newsletter.
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Ian Congreave, PayPerShop owner

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