In the current economic climate losing your job is the worst thing for many people and a reality for many people. You made a redundant by employer if you lose your job. Understanding the rights of redundancy is an important part of any insolvency procedure.
What is redundancy payment?
As per the Employment Act 139(1) ERA 1996, provide a minimum entitlement to a redundancy payment if their dismissals are attributable and have a set period of service with the employer. There are some circumstances such as for redundancy:
- Closure of your existing business,
- Closure of the employee’s workplace or
- Reduction in the number of staff
This is simply known as redundancy and employees may be entitled to redundancy payments.
Suppose if you have worked continuously for your employer more than two years or for at least two years, or if you have fixed term contractor of two years or more and expires due of redundancy you have the legal right to a statutory redundancy payment. However not all employees are eligible for statutory redundancy payment and there are some specific redundancy procedures to check before you are able to lodge a claim with the employment tribunal and your redundancy was made in a fair way or not and employees must follow in order to comply with the legislation.
If you have chosen for redundancy because of following reasons, this could be considered as unfair dismissal:
- Based on your age
- Based on your gender
- Marital status
- Sexual orientation
- Based on your race
- Based on your disability
- Religion or belief
- Based on your membership or non-membership of a trade union
- Based on your working pattern, e.g. part-time or fixed-term.
When Redundancy payment taxable and chargeable?
One of the first questions individual hits when confronting redundancy whether their redundancy payment is taxable or not? However, there are some special tax treatments that qualify for redundancy payments. Broadly, the first £30,000 of any redundancy payment is tax free under the Employment Protection Act 1978, but the rest may be taxed. In case if you have more than one job this exemption applies on both job. However other amounts in the package of their salary will be taxable and subject to National Insurance contributions (NICs). You have to pay your tax in the year you have received the money, not in the year you have made redundant.
The total paid amount of redundancy should be based on:
- How long you have been continuously employed
- Your age
- Your weekly pay, up to a certain limit.
rates of statutory redundancy payment are:
- 0.5 week’s pay for each full year of service when aged under 22;
- One week’s pay for each full year of service where you are aged between 22 or above, but under 41;
- 1.5 week’s pay for each full year of service where your aged 41 or over.
Here you can explore the guide about Redundancy Payment and Taxes.It may be your employer will automatically deduct tax from these before paying them to you. Or this can get complicated for you, so you can ask for a professional advice from experienced accounting firm if you are unsure.
the director of a limited company, you may have a vague understanding of
- Do you qualify for redundancy pay?
- How much redundancy pay will you receive?
- How does it work and what should you consider?
- How to make a claim for redundancy?
- What should you do if you are considering winding up to company?
You can explore this for more information: A guide to redundancy pay for directors - who qualifies and how to claim.