As the Furlough scheme comes to an end, many are predicting hundreds of thousands of redundancies in the UK.
It is perhaps timely to remind you about Statutory Redundancy Payment Calculations.
There are two types of redundancy payment:
Calculation of Statutory Redundancy:
Work out how many complete years you have been employed by your company.
If less than two years, there is no entitlement to statutory redundancy pay, if you have worked for your employer for two years or more:
Your weekly pay is capped at £538 per week. If you earn more than this, your statutory redundancy pay will be capped. If you earn below £538 per week, your full weekly pay will be taken into account.
Redundancy pay i.e. a payment in direct connection with the termination of your employment contract is tax free up to a value of £30,000.
If you receive ‘redundancy’ payments in excess of £30,000, these are subject to income taxes and national insurance contributions.
If you receive other payments such as holiday pay, payments in lieu of notice (PILON) or you keep the company car, these are subject to income taxes and national insurance contributions.
If you receive a ‘restrictive covenant’ payment e.g. you cannot work for a competitor of your employer for a period e.g. 6 months, 1 year, 2 years, these are subject to income taxes and national insurance contributions.
Sometimes, your employer may not officially register your termination as a redundancy because they wish to keep the job position and title open for a few years for when things ‘pick up’, then this would not be a true redundancy and payments would also be subject to income taxes and national insurance contributions.