Bringing a Claim for Statutory Redundancy Payment

Statutory Redundancy Payment

A statutory redundancy payment (SRP) is typically given to an employee who has been dismissed due to redundancy or has become eligible for a payment because they were laid off or kept on short-time working, and who has at least two years' continuous employment by the relevant date. This payment is governed by statutory provisions that address entitlement, calculation, eligibility, exclusions, and enforcement, including situations where an employer becomes insolvent or refuses to pay.

Eligibility for a Statutory Redundancy Payment

General Eligibility and Continuous Employment: A statutory redundancy payment is usually payable to an employee. To be eligible, an employee must have completed at least two years' continuous employment ending with the "relevant date". This period of two years means 24 complete calendar months, and it includes any service before the employee's 18th birthday. When calculating continuous employment, both the first and last days of the period are counted. There is no lower or upper age limit for claiming a redundancy payment, as previous age limits were repealed by the Employment Equality (Age) Regulations 2006.

The Relevant Date

The "relevant date" is crucial as it is the date when a claim for a statutory redundancy payment arises, eligibility and exclusion are assessed, the payment amount is calculated, and the time limit for bringing a claim begins.

• For dismissals on notice, the relevant date is the date the notice expired.

• For summary dismissals or resignations without notice, it is the date of dismissal or resignation.

• For expired fixed-term contracts that are not renewed, it is the expiry date.

• If an employer dismisses an employee with no notice or less than the statutory minimum notice, the relevant date can be extended by the statutory minimum notice period to determine eligibility for the two years' continuous employment and to calculate the payment amount. This extension applies even if an employee waives their right to notice or accepts a payment in lieu. However, this extension does not apply in cases of lawful summary dismissal for gross misconduct, where the relevant date remains the dismissal date.

• The relevant date can also be modified if the employee serves a written notice to bring forward their termination date (in cases where the employer gave notice), becoming the date the employee's counter-notice expires.

• In a statutory trial period, the relevant date for time limits is the end of employment under the new contract, but for calculating length of service, it's the date the original contract ended.

• If an employee dies during their notice period, their contract is deemed terminated by the employer on the date of their death. If dismissed without sufficient notice and the employee dies before the statutory minimum notice would expire, the relevant date is the date of death.

Modifications to Two Years' Continuous Employment Requirement

The requirement for two years' continuous service is modified in several situations:

• Dismissal without notice or less than statutory minimum notice: Employment can be extended by the statutory minimum notice period to assess the two-year requirement.

• Re-employment within four weeks: If an employee is dismissed and then re-employed or re-engaged within four weeks, they are deemed not to have been dismissed, and the interval counts towards continuous employment.

• Previous recipients of SRP re-engaged/re-employed: Payment of a statutory redundancy payment generally breaks continuity of employment for future SRP purposes once the payment is received. This includes payments made via the state guarantee system, even if mistaken. However, continuity can be restored if the employee repays the SRP in full, for example, upon reinstatement.

• Re-employment by deceased employers' personal representatives: If an employee is re-engaged by a deceased employer's personal representatives within eight weeks of the employer's death, the interval is included in continuous service.

• Local government and NHS employees: Service across various bodies within local government or the NHS is treated as continuous for redundancy purposes, provided there isn't a significant gap (more than one week) between employments.

• Employees employed overseas: Generally, weeks of employment abroad count, but a week is discounted if the employee was employed outside Great Britain for the whole or part of it and was not an employed earner for whom a secondary Class 1 National Insurance contribution was payable. Continuity is preserved, but the start of continuous employment is postponed.

Concurrent Contracts

If an employee has multiple concurrent employment contracts with the same employer, and one job is made redundant, determining continuity can be complex. Statutory provisions suggest that a right to a redundancy payment may exist if one contract is terminated due to redundancy, provided the two-year continuous service requirement is met. Continuity of employment is generally assessed by looking at any week where an employee's relations with their employer were governed by a contract of employment, with a presumption in favour of continuity.

Case Law

Case law provides guidance:

• Where two separate and distinct contracts run concurrently, and one is terminated while the other continues, weeks of employment under each contract typically cannot be aggregated for continuity; continuity should be calculated by reference only to the terminated contract.

• However, if concurrent contracts existed and one previously terminated, leaving only one in place, it may be possible to look back over the whole employment relationship to determine continuity, including time when both contracts ran concurrently, upon the termination of the second contract (similar to successive contracts).

Workers and Exclusions

While most workers cannot claim a statutory redundancy payment, regulations allow certain categories of workers (who are not employees) to be entitled, such as specific clerks, police, fire officers, and registrars. Common categories of workers excluded from claiming SRP are independent contractors, self-employed individuals, most agency workers, office holders (unless specifically included by regulation or if they are employees but treated as office holders for pension purposes), partners, and parliamentary staff.

Certain groups of employees are also excluded from the right to a statutory redundancy payment:

• Crown servants, as they have their own redundancy pay scheme.

• Government employees of any overseas territory.

• Household servants and domestic staff who are closely related to their employer (parent, grandparent, child, sibling, etc.). Other household staff can claim SRP.

• Employee shareholders introduced in September 2013, do not have the right to SRP (though the status is being phased out, existing arrangements remain).

• Share fishermen/women were previously excluded but are no longer so since April 2018.

Exclusion from the Right to a Statutory Redundancy Payment

Even if otherwise eligible, an employee can be prevented from claiming an SRP due to their conduct or if they have contracted out of the right.

Unreasonable refusal of suitable alternative employment

An employee who unreasonably refuses a suitable alternative employment offer from their employer or an associated employer loses their right to an SRP.

Failure to work a notice period

If an employee given notice of redundancy wants to leave early and gives written notice within the "obligatory period of notice," they generally remain entitled to SRP. However, if the employer serves a written notice requiring the employee to withdraw their notice and remain employed until the original notice expires, and the employee does not comply, they will not be entitled to SRP. An employment tribunal may still order an "appropriate payment" considering what is just and equitable.

Misconduct

Generally, an employee guilty of gross misconduct (entitling summary dismissal) loses their right to SRP, especially if dismissed without notice, short notice, or with a statement indicating dismissal due to misconduct. However, if the employer gave notice to the employee, or the employee gave notice to claim for lay-off/short-time working, this exclusion may not apply if the dismissal was due to strike action. For other reasons, an employment tribunal may still award an "appropriate payment" if it is just and equitable, especially if the gross misconduct occurred during the notice period after redundancy notice was given.

Failure to comply with a notice of extension after a strike

If an employee on redundancy notice takes part in a strike, the employer can serve a written notice of extension (equal to days on strike). If the employee does not comply with this extension, they generally lose their right to SRP. The employer can agree to pay, or a tribunal may order an "appropriate payment" if it was reasonable for the employee not to comply or they were unable to.

Contracting out of the right

Generally, any term trying to exclude an employee's SRP rights is void. However, an employee can waive their rights in limited circumstances:

• Through a legally binding settlement agreement or an agreement reached through Acas conciliation. These must relate to existing or contemplated proceedings, not general future rights.

• Under a collective contracting-out agreement approved by an exemption order from the Secretary of State, entered into by employers/organisations and trade unions, where employees have a right to payments on termination of employment and disputes can be submitted to an employment tribunal.

Calculation of the Statutory Redundancy Payment

The Statutory Redundancy Payment SRP is calculated in exactly the same way as the basic award for unfair dismissal in accordance with the formula below (s.162 ERA):

Age Factor

The employee’s age factor is as follows: