Employment Law Solicitor Chris Hadrill on what value redundancy severance package you should expect

If you’re being made redundant from your job then – depending on how long you have worked for your employer – you will be entitled to certain payments from the business that you work for. In this article Employment Law Solicitor Chris Hadrill explores what nature of redundancy payments you should expect if you’re being made redundant.

Broadly speaking, the nature of the payments that you can expect in your redundancy severance package can be split into three different types:

  1. Contractual payments
  2. Statutory payments
  3. Ex-gratia payments

Contractual payments

Contractual payments are – as you’d expect – what you are contractually entitled to. There are a number of types of contractual payment which you could be entitled to upon termination of your employment:

  1. Your notice pay (if you’re being paid in lieu of notice instead of working this it may be referred to as “Pay In Lieu of Notice” or “PILON”) – this will include your wages as well as other contractual entitlements (such as any car allowance, medical benefits etc.) during the notice period
  2. Your accrued but untaken holiday pay
  3. Any bonus that you are contractually entitled to
  4. Any commission you are contractually entitled to
  5. Any contractual redundancy pay (sometimes referred to as “Enhanced Redundancy Pay” or “ERP”)

In order to determine what contractual payments you’re owed you should review the following (if applicable):

  1. Your contract of employment
  2. Any addendums or updates to your contract of employment
  3. Your staff handbook or other similar policies
  4. Any correspondence or documents detailing what the terms of your contract are
  5. Any collective agreement that you’re party to

Statutory payments

In a redundancy situation, you will be entitled to a statutory redundancy payment (or “SRP”) if you have worked for two years or more with your employer. Statutory redundancy pay is calculated using a particular formula based on the number of years (full) service that you have served, your age, and your gross weekly wage. For example, if you are 52, have worked for seven years for your employer, and earned a gross weekly wage of £430 then you would be entitled to the following statutory redundancy payment: £4,515 (1.5 * 7 * £430).

However, although you are statutorily entitled to a redundancy payment if you have two or more years of service with your employer, you may lose your right to a statutory redundancy payment if you unreasonably refuse an offer of suitable alternative employment.

Ex-gratia payments

Ex-gratia payments are discretionary and are generally paid as compensation for the manner of the termination of your contract of employment and, therefore, as a ‘settlement payment’ for any potential or existing claims that you could bring in the Employment Tribunal. For example, if your employer has dismissed you for redundancy but hasn’t undertaken a consultation period, considered any suitable alternative employment for you, or allowed you to appeal against you dismissal (among other things) then your dismissal may be unfair (and you may therefore choose to bring a claim for statutory unfair dismissal). You would – in this situation – be in a position to negotiate an ex-gratia payment with your employer which reflected the strength of your potential claims and the reasonable value of those claims.

So what value redundancy severance package should I expect?

Unfortunately, there’s not a simple answer to this question – the nature and value of the payments that would be reasonable in your situation will completely depend upon the facts that are specific to your situation. However, here are a number of tips for you if you’re going through a redundancy process:

  1. Check what your notice period is and what estimate what value of payment you should expect (i.e. if you are paid £500 gross per week with no other benefits payable and have a notice period of 4 weeks then you should expect a payment of £2,000 gross in respect of your notice)
  2. Check how many days accrued but untaken holiday you will have as of the date of the termination of your employment
  3. Check whether you’re entitled to and what value of statutory redundancy pay you should expect (handy tip: use the Direct.Gov website calculator to work this out)
  4. Get some legal advice from a specialist employment solicitor – you may think we would say this but if you’re being offered a settlement agreement by your employer then a) your employer has a statutory obligation to inform you to obtain legal advice from an independent adviser, and b) your employer will normally pay the majority – if not the whole – of your fees for doing so, so there’s no harm in making enquiries!

If you have an enquiry relating to your redundancy payment or want to obtain legal advice on your settlement agreement then please call our specialist employment law team today on 020 3397 3603.