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Last Updated: Wednesday, 12 February, 2003, 19:02 GMT
Dealing with redundancy

Losing your job can have legal as well as financial repercussions, so it's useful to know exactly what you're entitled to and what your rights are.

Your rights will depend on how long you've worked for your employer and why you've been dismissed

At the very least anyone made redundant has a right to be paid an amount of money equal to:

  • any wages owed
  • holiday pay owed
  • compensation for pay lost if you weren't given a proper notice period.

    A notice period should be specified in your contract of employment. If it isn't then you're entitled to the statutory notice period, which is one week's notice for each year worked - up to a maximum of 12 weeks.

    Alternative job

    If you're made redundant you could qualify for Statutory Redundancy Pay - this is the basic legal minimum. To qualify you must:

  • be an employee (self-employed people and casual workers don't qualify)
  • be under 65 (unless the normal retirement age for your job is under 65)
  • have worked for the employer for two years continuously since the age of 18.

    You can lose the right to statutory redundancy pay if you reject a suitable alternative job. Whether a job is suitable will depend on the terms - for example, hours, location, and pay.

    You have the right to a trial period in an alternative job and can still take redundancy if you or your employer decides it isn't working out.

    How much statutory redundancy pay you'll get depends on your age, your weekly pay and how long you've worked for the company.

    If you're aged 18-21 you get half a week's pay for each year of service; 22-40-year-olds get one week's pay; and those aged between 40 and 65 get one-and-a-half week's pay for each year of service.

    Your company may well offer a better redundancy package than the statutory minimum. If you haven't got a pre-arranged agreement, it would be worth trying to negotiate a deal.

    Extras thrown in

    You might even be able to get extras thrown in like your computer, company car or mobile phone. You might also persuade them to pay for private careers advice.

    There are many reasons why your employer is allowed to make you redundant:

  • your company is closing down
  • the work you do is no longer needed
  • your company is moving location
  • it decides it needs fewer staff.

    They are allowed to dismiss you for serious misconduct or ineptitude. But they must not try to disguise this as a redundancy. It is the job that becomes redundant - not the worker. Make sure you know the real reason.

    Your employer isn't allowed to get rid of you on the grounds of sex, pregnancy, race, disability or trade union membership.

    If you are unsure whether you have been fairly dismissed, seek advice from your union or the Citizens Advice Bureaux.

    If you feel you've been unfairly dismissed - or you don't agree with your redundancy payout - you can take your employer to an Employment Tribunal. You'll find this easier if you can do it through a union.


    A tribunal can order an employer to give you your job back, but will usually make them pay you compensation.

    The maximum is 51,700 plus an allowance for each week's pay lost up to a limit of 240 a week. This cap is raised each year in line with inflation. You can't claim for more than 20 years service.

    Employment tribunals are a special kind of court that deals with all types of employment issues. Sometimes lawyers will be involved but often workers will be represented by union officers or even by themselves.

    Costs aren't normally recovered, and neither is legal aid available for representation - though you may get legal aid for advice on whether you have a good case.

    You generally have to have worked for a company for 12 months to be able to take a case to a tribunal - but there are exceptions to this rule.

    In cases of discrimination and for health and safety issues you can complain from your first day. Generally you have three months to take action.

    To make a case you need to fill in a form called an ET1. You can get this from your union or your local Jobcentre. For more information call the Employment Tribunal Service Line on 0345 959775.

    What to do with your money

    The good news is that the first 30,000 of redundancy pay is tax-free. The rest may be taxed, although you might be able to reduce the bill by putting some of it into your pension.

    You might also want to consult an Independent Financial Adviser. You can get a list of local advisors from IFA Promotions - call 0800 085 3250.

    Christine Ross, head of financial planning at SG Hambros, says you shouldn't rush into making decisions.

    She advises putting the redundancy payment into a high interest account to start with while you begin to review your debts and liabilities.

    "Generally savings after tax are going to pay you less than you will pay out on interest for your mortgage or credit cards," says Christine.

    "If there's any left over look first at Isas and unit trusts. But do keep some in a good high-rate internet or telephone-based deposit account."

    The future

    Before leaving your employer make sure you have your P45, written details of your redundancy package and a good reference.

    There are also private careers advice companies - though these can be expensive.

    The Department of Trade & Industry has a redundancy payments office - call 0500 848 489. The TUC Know Your Rights helpline is on 0870 600 4882.

    This information does not constitute legal advice, but is intended for guidance only.

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