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Redundancy Pay

Redundancy is a labor situation when an employee is determined to be unnecessary because the job description which she is performing is no longer necessary. This could be because: the company reorganization will make the position unnecessary, the skills possessed by the employee are no longer needed by the company, or the entire department (under which the employee belongs) is no longer necessary. When the position is deemed redundant, they employee is dismissed under the clear understanding that it is not for the employer’s wrongdoing.


Redundancy is the name given to a situation when an employee is dismissed from a business because of circumstances outside of everyone’s control and not because of the employee’s wrongdoing.

Under the US Labor Law’s Fair Labor Standards Act (FLSA), employees who are terminated under no fault of their own are to receive several benefits.

Severance Pay. Under the FLSA, there is no requirement for severance pay. It is usually set by the company. Most common basis for the computation of Severance pay is length of service and current salary. However, the Employee Benefits Security Administration (EBSA) is an organization that may assist employees who did not receive or received an unfair severance pay. The severance pay is given as a lump sum. Because it is not regulated by the FLSA, the employer can opt to hold off its release pending pre-determined requirements. Even the computation of how much it’s going to be is not calculated. According to the FLSA website, they usually require payment of at least the federal minimum wage for all hours worked in a workweek and time and one-half an employee's regular rate for time worked over 40 hours in a workweek.

Redundancy Compensation

Health Coverage. If an employee is terminated under no fault of their own, they may be eligible to continue their group health benefits provided by their group health plan. This will last for a limited period of time. This is intended to allow the employees to bridge an employee until his next employment. The company who terminated the services of the employee are required to provide notices to their employees as dictated by the Consolidated Omnibus Budget Reconciliation Act (COBRA) and the Health Insurance Portability and Accountability Act (HIPAA).

Insurance Payments. If the state law determines the employee gets terminated under no fault of their own, they may be eligible to receive insurance payments which will give them temporary financial assistance. Under the Federal-State Unemployment Insurance Program, each state formulates a different unemployment insurance program. These programs all follow guidelines set forth by the federal law.

Extended Benefits. This is provided to employees who have exhausted all their after-employment benefits. As explained above, these benefits extend to a limited period of time. When these run out, it is not uncommon for people to find themselves unemployed. When this happens, you can look into extended benefit. Not everyone is qualified to get this though. The state will determine your eligibility.

Remember that employee rights are well protected by the law. You can check with the US Department of Labor for any assistance you might need.


The Worst Has Happened


Let us now suppose that the worst has in fact happened and that your nightmare of being made redundant has now become true. The employer has not dismissed you unfairly and duly acknowledges that you were indeed made redundant and now are entitled to receive Redundancy Pay. We now look at the conditions under which you are liable to receive Redundancy Pay and the amount that you may receive as Redundancy Pay.

In order to demonstrate the concept of Redundancy Pay, we suppose that you are living and working in the United Kingdom. The Employment Rights Act deals with the matters of redundancy and its related pay. But before we take a look at how such pay is calculated, we must familiarize ourselves with the cases in which redundancy takes place.

The first case is that of unfair dismissal, which is a tool used by some employers to camouflage the redundancy as a dismissal so as to save upon redundancy costs. In it, the employee has to prove that he was in two years continuous employment with the employer and that the employer has unfairly dismissed them.

If the employer fails to provide concrete evidence that the dismissal was indeed fair, the court may as well take it to be a redundancy and award the employee with full redundancy compensation.

Another case is that of genuine redundancy. In order to qualify for such a Redundancy Pay, the person must be above the age of eighteen years old and must have been with the employer in continuous employment for two years or more.

He or she must have been served with a notice of at least one week and must then have been dismissed on the grounds of a genuine redundancy situation. If the above conditions are met, the person is entitled to Redundancy Pay regardless of the fact that he or she has been able to find another job or not.

Get Your Earned Money

In calculating the Redundancy Pay, only the last twenty years of employment are taken into consideration. Any service rendered to the employer by the employee before the attainment of eighteen years of age is also ignored. The rate of Redundancy Pay is one and a half week’s pay for every complete year of service while the age was between 41 to 65 years and one week’s pay for each complete year of service while the age was between 22 to 41 years. The maximum weekly pay cannot exceed the figure of 280 GBP and since the last twenty years of service are taken into account, the maximum Redundancy Pay cannot be higher than the figure of 8400GBP at present.

It is also worth mentioning over here that the full amount of the pay must be paid to the employee as per the calculations and nothing has to be deducted from him or her; it is the employer that has to bear all the costs of administering the redundancy.

Redundancy Pay thus offers a sort of an assurance to the employee that in spite of him or her being made redundant, the employer has recognized the fact that the employee had once been his asset and that the employer has put up some compensation in order to help the employee counter certain financial difficulties during a period of frictional unemployment.

Redundancy Pay

  • What Are Your Redundancy Entitlements?
    The rate of pay at which the Redundancy Entitlements are calculated as follows. For every complete year of employment up to the age of 22, the person is awarded half week’s pay.
  • Know Your Redundancy Cover
    It has been often observed that improper redundancy policies or lack of proper Redundancy Cover plans also have contributed a lot towards the loss of so many industrial sector entities.
  • What Redundancy Payments am I Entitles To?
    It is unfortunate to say that many firms suffer loss due to high Redundancy Payments. Redundancy Payment related losses should be consistent in their course of operations and business.
  • Unfair Dismissal Compensation
    If the employee proves to the court that the dismissal was indeed unfair, the court may grant him Unfair Dismissal Compensation. How much can this be?
  • The Proper Redundancy Procedure
    The employer cannot move further until he has convinced the trade union that the Redundancy Procedure will be carried out fairly and without bias to anyone.
  • All About Constructive Dismissal
    Constructive Dismissal occurs when an employer, although willing to continue employment, changes some essential term of the contract, so that its impossible for the employee to continue.
  • Your Compromise Agreement Rights
    The Compromise Agreement will be deemed valid if it's made in writing and there is proof that the employee has consulted a lawyer their own free will, and not under coercion or duress.

Redundancy Pay 

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