Is an employee who asserts redundancy through the lay off and short-time provisions of the Employment Rights Act entitled to notice or a payment in lieu of notice

Is an employee who asserts redundancy through the lay off and short-time provisions of the Employment Rights Act entitled to notice or a payment in lieu of notice

In order to receive a statutory redundancy payment, a laid-off employee must resign from their employment, after having notified their employer of their intention to claim a redundancy payment. The resignation must be done in accordance with the notice requirements stipulated in their contract, or on one week’s notice, whichever is the longer notice.

This requirement for a minimum of one week’s notice reflects section 86(2) of the Employment Rights Act 1996 (ERA 1996), which provides that the statutory minimum notice to be given by an employee to an employer is one week (after the employee has continuous service of one month or more).

Entitlement to pay during the notice period, or to a payment in lieu of notice, will depend on the terms of the employee’s contract. Issues to consider will be whether the employer can elect to make a payment in lieu of notice (PILON) where the employee has given notice and whether the PILON provision specifies the rate at which the employee must be paid, etc. The terms on which the employee was laid off or put on short-time working may also contain provisions regarding notice and notice pay, where notice to terminate is given by either party during the period of lay-off or short-time working.

If the employee has been continuously employed for one month or more, they will have the right to minimum rates of pay during their statutory notice period (ie in this case, one week), even if they are not provided with work during that period.

This right to minimum pay during the statutory period of notice does not apply where the period of notice that the employer is contractually required to give is at least one week more than the statutory minimum period of notice required by ERA 1996, s 86(1). In that event, any entitlement to payment that the employee may have during the notice period will be determined by reference to their contract. The same exclusion does not appear to apply if it is only the employee who is required to give more than the statutory minimum notice.

Where the exception does not apply, the entitlement to minimum rates of pay during the statutory notice period differs slightly depending on whether or not the employee has normal working hours (as defined in ERA 1996, s 234) under the contract of employment in force during the period of notice:

• an employee with normal working hours is entitled to be paid an average hourly rate calculated by dividing a week's pay by the number of normal working hours, for any hour during which they were (among other things) ready and willing to work but no work is provided for them by their employer (ERA 1996, s 88(1))

• an employee with no normal working hours is entitled to a week's pay for each week of notice during any period during which they were ready and willing to do work (ERA 1996, s 89(1)–(2))

A week’s pay is defined in ERA 1996, ss 220226, and is calculated differently depending on whether or not the employee has normal working hours. A week's pay is not capped for these purposes.

Where notice was given by the employee, the employer’s liability under ERA 1996, ss 8791 does not arise unless and until the employee actually leaves the employer’s service in pursuance of the notice, ie the employer’s liability to pay is postponed until such time as the employee leaves (ERA 1996, ss 88(3) and 89(5)).

This means that where the employee has given notice but has not yet left employment, the employee’s entitlement to pay during their notice period will be governed by the terms of their contract and/or the lay-off (as noted above), not by the provisions of ERA 1996, ss 8791.

For further information, see Practice Notes:

• Redundancy payments for lay-offs and short time—Employee must terminate the contract

• Statutory minimum notice—Employee entitlement to pay during statutory notice period

• Calculating a week's pay

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