Contractual redundancy payments

The following Employment practice note provides comprehensive and up to date legal information covering:

  • Contractual redundancy payments
  • Redundancy policies
  • Age discrimination
  • Taxation

Contractual redundancy payments

An employee is entitled to a statutory redundancy payment when:

  1. he has been continuously employed for not less than two years

  2. he has been dismissed, and

  3. the dismissal was by reason of redundancy

For further information, see Practice Note: Entitlement to statutory redundancy payment.

However, it is relatively common for employers, particularly larger employers and those that are unionised, to pay redundancy payments to redundant employees which are in excess of the statutory minimum under the statutory redundancy payments scheme. The employer may have an established written policy which sets out what employees can expect to be paid as such enhanced redundancy payments (some policies may, expressly or impliedly, be incorporated as part of the employee’s contractual terms of employment or alternatively, such policies may be expressed to be purely discretionary and not form part of the contractual terms) or the employer may decide, at its discretion, to set up a one-off arrangement for a particular redundancy exercise. Sometimes there may simply be an established custom and practice of making enhanced redundancy payments which may or may not, depending on the circumstances, have become an implied contractual term of employment.

This may be known as a contractual, enhanced or occupational redundancy scheme or policy.

Enhancement may be in the form of:

  1. a larger payment than that to which the employee would be entitled under the statute

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