Each month, local solicitor Pam Douglas takes a common legal issue and explains it for readers
With so many stories circulating in the media about companies closing down or cutting jobs due to the prevailing tough economic conditions, many of us are now facing the real and worrying prospect of redundancy.
Years ago, it was not uncommon to hear of people receiving hefty pay-outs following the loss of their jobs, often enabling them to start their own businesses, pay off their mortgages or enjoy expensive indulgences such as new cars or luxury holidays.
Many of those employees benefited from strong trade union backing and/or generous contractual terms, often including pay-outs of up to one month’s salary per completed year of service. Understandably, many even opted for voluntary redundancy, due to the potential opportunities the cash windfall presented.
These days, though, more and more private sector redundancy payments are calculated in line with statutory minimum guidelines, which are not very generous.
It is also less common, in many industries, to stay with the same employer for more than a few years, which obviously limits a likely redundancy or severance award.
Added to this, one must have clocked up a minimum of two years’ service to be legally entitled to any compensation at all.
Currently, statutory minimum guidelines state that an employee aged 40, with 10 years’ service, earning £30,000 per year, would be entitled to about £5,250. Here’s how they work it out:
- Half a week’s pay for each full year worked when you are aged under 22
- One week’s pay for each full year worked when you are aged between 22 and 41
- One and a half weeks’ pay for each full year worked when you are aged 41 or older.
In calculating statutory entitlement, weekly pay is capped at £525 and maximum service is capped at 20 years, meaning that the most an employee could be entitled to is £15,750 – that would apply to somebody in their 60s with 20 years’ service.
With uncertainty on the horizon, and the cost of living to consider, a £5,000 pay-out is likely to seem like a drop in the ocean and might only cover a few months’ rent or mortgage payments.
If you are facing redundancy, it is important to plan ahead and not to panic. I have put together a few key tips to help you through it:
You should discuss all the options (including potential alternative roles) with your employer who is legally obliged to follow certain procedures before finalising a decision. Failure to do so may leave them open to a tribunal claim for unfair dismissal.
Do also look closely at your paper employment contract, as you may be entitled to more than the statutory minimum levels outlined above.
This is particularly likely if you hold a professional, managerial or executive position, but everyone should check, as many employment contracts are sloppily copied and pasted, so they could easily contain errors or omissions that work in your favour.
If you are a member of a trade union, don’t forget to speak to your union representative who may be able to help you negotiate better terms or even keep your job.
Finally, it is imperative that you speak to a specialist employment lawyer who can guide you through the process and ensure that your rights are upheld and work to ensure that you get the best outcome. Some larger employers will contribute to the cost of legal advice, so it is certainly worth asking.
You might also find that you are eligible for free legal advice and representation under the legal expenses cover that comes as standard with many home and vehicle insurance policies.