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Redundancy

Index

You can read through this information sheet, or go directly to the sections you want to read by clicking on these links:

• Who can get help?
• Have you been made redundant?
• Redundancy Pay
• Means tested benefits and redundancy payments
• Jobseeker's Allowance and redundancy
• Frequently asked questions

Who can get help?

If you have been made redundant there are various welfare benefits that might be available to you depending on your income, savings, health, family and type of accommodation.

If you are not working but are capable of work, available for work and actively seeking work: you may be eligible for Jobseeker's Allowance (income-based or contribution-based JSA).

If you are not capable of work due to sickness or disability: you may be eligible for Employment and Support Allowance (income-related or contribution-based ESA).

You might also be able to claim:

• Child Tax Credit (if you have children)
• Housing Benefit (England, Scotland, Wales) or Housing Benefit (Northern Ireland) (if you are liable to pay rent)
• Council Tax Benefit (if you are liable to pay Council Tax) 
• You might be able to claim for help with your mortgage if you qualify for Income Support, income-based JSA, or income-related ESA.

You might also qualify for a payment from the Social Fund depending on your circumstances.

If you were receiving Working Tax Credit when you were working, you will no longer be entitled to it if you are no longer working (check run on period).

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Have you been made redundant?

The way you left your last job can have an impact on your benefits. It is important to know the difference between redundancy and dismissal.

You are made redundant if you lose your job because the job no longer exists or your employer needs less people to do work – this can happen if your employer is reducing their workforce or if they go out of business. You can volunteer for redundancy if this is offered to you or it can be imposed on you.

If you are dismissed from your job because of conduct or performance, whether you dispute this or not, then you have not been made redundant, you have been dismissed. You might also leave a job voluntarily.

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Redundancy Pay

If you have worked for an employer continuously for more than two years and you are made redundant, you should qualify for statutory redundancy pay - usually a lump sum calculated on your weekly salary, length of service and age. For more information, see the Government's Directgov website (link opens in a new window). 

Some employers will offer redundancy payments which exceed the statutory amount and this is known as a contractual redundancy payment.

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Means-tested benefits and redundancy payments

Redundancy payments are treated as capital for means-tested benefits. If your redundancy payment takes your capital to over £16,000 and you are aged under State Pension age, then you are not entitled to means-tested benefits (except maybe second adult rebate for Council Tax Benefit).

If your redundancy payment takes your capital to between £6,000 and £16,000, you may be entitled to means-tested benefit. However it is assumed that you receive some income from your capital and your benefit amount is reduced accordingly.

Contractual redundancy pay is treated slightly differently for Jobseeker'S Allowance. The statutory redundancy entitlement is deducted from the contractual redundancy payment and the difference is ignored completely. For other means-tested benefits it is still treated as capital.

Pay in lieu of notice and holiday pay is ignored for means-tested benefits, provided you make the benefits claim after your employment ends.

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Jobseeker's Allowance (JSA) and redundancy

If you claim JSA and the decision maker thinks that you left your previous job voluntarily or you were dismissed due to ‘misconduct’ they can apply a sanction. This means that you receive no JSA or reduced JSA for a period of time decided by the decision maker. The length of time will vary depending on individual circumstances. You can appeal against a decision to impose a sanction if you disagree that you lost your job voluntarily or through misconduct or if you think you have just cause for leaving. You can also appeal against the period of time you have been sanctioned.

However if you are made redundant or volunteer for redundancy during a redundancy situation at work, then you should not be sanctioned for this. If you are offered another job by your employer as part of your redundancy and you decide not to take the job as it is not equivalent to the job you have been doing, then you should not be sanctioned for this. You may also try out a new job in this situation for up to four weeks without losing your redundancy rights if it does not work out for you.

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Frequently asked questions

1. Are redundancy payments taxable?

Redundancy payments up to £30,000 are normally tax free.

2. What sort of notice period does my employer have to give me?

If your employer is making you redundant, they must give you a notice period before your employment ends. The statutory notice periods are:

• at least one week’s notice if you have been employed between one month and two years
• one week’s notice for each year if employed between two and 12 years
• 12  weeks’ notice if employed for 12 years or more
• some other period set out in your contract of employment (but not less than the statutory notice).

Sometimes your employer may have included a payment in lieu of notice clause in your employment contract. This means that your employer can end your employment contract with no notice. However if they do this, they must give you payment for all of the pay you would have received during the notice period.

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This information has been produced by Broadway.

Last updated: 25 November 2011