HR & Employment Law Insights

Helping family businesses, start-ups, charities, social enterprises, and other growing or established businesses throughout the UK make sense of HR and Employment Law challenges.

We get asked HR related questions every day and each week we will be sharing our top question of the week that we have been asked here at The HR Booth.

In this week’s question of the week, Alistair discusses redundancy pay.

QUESTION

How should an employer calculate a redundant employee’s length of service for the purposes of redundancy pay if the employee is paid in lieu of notice?

ANSWER

Where an employee is dismissed with a payment in lieu of notice, to calculate his or her length of service for the purposes of statutory redundancy pay, the employer should add on the minimum statutory notice period to the employee’s service as at the date on which the employment ends.

An employee’s length of service for redundancy pay purposes should be calculated as at the “relevant date”. Where an employee has been dismissed without the statutory minimum notice to which he or she is entitled, including where a payment is made in lieu of notice, under the Employment Rights Act the relevant date is the date on which the minimum notice would have expired had it been given.

So if an employee would have reached an anniversary increasing his or her length of service during the statutory minimum notice period, had he or she not been dismissed without notice, the extra year should be included in the calculation of his or her redundancy payment. For example, an employee with six years and 11 months’ service is entitled to six weeks’ statutory minimum notice. If the employee is dismissed with a payment in lieu of notice, the redundancy payment will be calculated based on seven years of service because the six weeks’ notice required would have taken him or her past the anniversary date.