9 December 2019
The Employment Appeal Tribunal (EAT) has provided further clarification on how statutory and contractual redundancy pay should be provided to employees.
When an employee is made redundant, they are entitled to receive statutory redundancy pay if they have at least two years’ continuous service. The payment is calculated on the basis of an employee's age, length of service and weekly pay, subject to a weekly maximum. In addition to this, organisations may also provide enhanced, or contractual, redundancy pay. They are free to set this at any rate they choose, provided it does not go below the statutory requirements. The overall payment can also be offset against the statutory amount.
If an employee facing redundancy refuses to take up suitable alternative work when offered, their right to redundancy pay is extinguished. However, whether the new role would be considered suitable has regard to the skills and qualifications needed to do it, alongside its status, pay and benefits. If employees are not provided with their enhanced redundancy pay and pursue a breach of contract claim through the employment tribunal, the maximum amount they can be awarded is capped at £25,000 by the Extension of Jurisdiction Order 1994.