It's the law: Redundancy, part five: payments

Payments are calculated based on an employee's age and length of service.

Once a charity has carried out the process of consulting those employees who are being made redundant and has considered but been unable to provide suitable alternative employment for them, it will have to make a redundancy payment to them. The final part in this series on redundancy will look at the obligations of employers.

In order for employees to be entitled to redundancy payments, they will have to meet four criteria. These are: that they are employees; that they have been continuously employed for a period of two years; that they are being dismissed; and that the dismissal is because of redundancy.

Statutory redundancy pay is based on age and length of service multiplied by a proportion of salary. For every year of service during which employees were aged 41 or over, they are entitled to one and a half weeks' pay. For every year of service between the ages of 22 and 40, employees are entitled to one week's pay. And for every year of service in which employees were aged 21 or under, they are entitled to half a week's pay.

A week's pay is capped at £310, and a maximum of 20 years of continuous service can be taken into account. The maximum statutory redundancy payment is £9,300.

Before age discrimination legislation was established in October last year, employees who had reached the age of 65 or the normal retirement age for their job were excluded from claiming redundancy payments. No service before the age of 18 counted towards calculations, and for employees aged between 64 and 65 the amount due was reduced by a 12th for each month by which their age exceeded 64.

However, the age discrimination laws have meant these lower and upper age limits have been abolished.

Many charities will pay enhanced redundancy payments. These might be age-discriminatory unless they are made in accordance with a scheme that follows the statutory redundancy scheme. Multiplying the amount allowed for each year of employment by a figure of more than one or multiplying the overall payment by a figure of more than one are both methods that fall within the statutory scheme.

- Emma Burrows is a partner and head of the employment group at Trowers & Hamlins solicitors.

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