Voluntary Redundancy: Know Your Rights
The days of the ‘job for life’ are long gone. According to the Telegraph, the average UK worker will have six different job roles in their lifetime and 45% of employees have been made redundant at least once in their career.
It is a worrying time because you lose the security of your pay cheque and are forced to look for a new job. You may be unaware of the fact that there are two types of redundancy; including one where you have the option to refuse.
What is Compulsory Redundancy?
Compulsory redundancy involves being laid off at work. It is a completely different situation from being fired. While both involve the loss of employment, redundancy comes with a severance package and it shouldn’t count against you when looking for a new job. What normally happens is that an organisation is unable to drum up enough business to keep staff busy. Profits tumble and the only way to keep the company afloat is to terminate the contracts of a certain number of employees.
Firms use different assessment techniques to decide which staff should stay and which should go. If you endure compulsory redundancy, you are entitled to statutory redundancy pay (capped at £508 a week) if you have worked at the company for more than two years. You are also entitled to a redundancy notice depending on how long you worked at the organisation.
For example: you receive a minimum of 12 weeks’ notice if you have been employed by the company for over 12 years.
What is Voluntary Redundancy?
As the name suggests, voluntary redundancy is something that is offered to you but there is no obligation to accept it. It asks you to nominate yourself for redundancy and you typically receive a larger financial package than you would with compulsory redundancy. It is classified as a dismissal and not a resignation so you retain the same statutory rights as someone subject to compulsory redundancy.
Should I Take Voluntary Redundancy?
It is common for employees in Northern Ireland to accept voluntary redundancy because of a fear that if they refuse, they will become subject to compulsory redundancy which offers a smaller financial package. While it is a possibility, you need to step back and decide if leaving your job right now is the best decision for your career.
Consider your financial situation and whether you can afford to spend several months looking for a new job. What is your industry like for job prospects right now? Will you have to relocate to get a similar job? The last question is critical if you have a spouse and children. If you stay and colleagues are laid off, will you still be happy to work at the company?
If you decide to leave, you don’t have to accept the first offer. Outline your positive contribution to the company and try to get additional periods of notice to help give you more time to find a new role. It is also worth using an experienced third-party to handle your negotiations.
Calculating Redundancy Pay
How much redundancy am I entitled to?
If you accept voluntary redundancy, the sum you’re offered could range from a week’s pay to a full year’s salary. It will include various factors such as:
- The time you’ve worked at the firm
- length of the notice period
- Current salary
- Contractual benefits.
For the record, here are the sums one can expect on compulsory redundancy, so your voluntary redundancy package should be better:
- Half a week’s pay for every full year you’ve worked when under the age of 22.
- A full week’s pay for every year worked between the ages of 22 and 41.
- 1.5 week’s pay for every year worked aged 42+.
- You’ll also receive the wages you’re entitled to for your notice period.
Normally, payments for voluntary redundancy come in lump sum form. However, you can ask for them to be staggered and the first £30,000 is typically tax-free.
What is the Notice Period for Voluntary Redundancy?
Please note that your company may offer a longer notice period but here are the legal minimums:
- One week’s notice if you have been employed for more than one month but less than two years.
- A week’s notice for each year worked if you have been employed at the company for more than two years but less than 12. So, if you have worked at the firm for 7.5 years, you receive seven weeks’ notice.
- 12 weeks’ notice if you have been employed for 12+ years.
In some cases, you could be entitled to ‘reasonable’ time off to find new employment. You need to be continuously employed by the company for at least two years to have a chance of this entitlement. If you elect to take this time off, you only receive up to 40% of your weekly pay.
Redundancy Rights
Once you are made redundant, you should do some research to find out if you’re entitled to state benefits such as income support or jobseeker’s allowance. Here are some of the criteria for the latter option:
- You work a maximum of 16 hours a week.
- Your partner works a maximum of 24 hours a week.
- Your current savings, including the redundancy pay received, adds up to less than £16,000.
If you are concerned about your financial situation, check out www.nidirect.gov.uk to find out what you’re entitled to. It is also worth speaking to a financial advisor or your bank manager.
Final Thoughts on Voluntary Redundancy
Don’t be lured into voluntary redundancy by the promise of a fat lump sum. It will last less time than you think and could result in significant financial strife if you don’t plan ahead. Before you consider accepting voluntary redundancy, make sure you have set a realistic budget to determine your financial situation.
Think about the likelihood of finding a job with similar, or better, prospects and salary package. On the other hand, if you believe there will be no financial issues and that getting a new job won’t be a problem, voluntary redundancy could set you on the road to a successful career.
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