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Company Law

Q: Redundancy pay - is it negotiable?

A friend is taking redundancy from a theatrical partnership where he has been head of design for two decades. What is the minimum amount he can expect and is this negotiable?

A: Your friend meets the qualifying period for redundancy of two years' minimum service. The maximum number of years of continuous service which can be used in the statutory redundancy calculation is 20, so it seems your friend qualifies for the maximum.

However, there is a limit on the amount of weekly pay which can be taken into account in working out redundancy entitlement. This limit is reviewed annually and is currently £240. For each complete year of continuous service between the ages of 18 and 21, the entitlement is to one-half of one week's pay and between the ages of 22 and 40, to one week's pay and between the ages of 41 and 65 one and a half week's pay, subject to that limit in each case. You do not give the age of your friend so I cannot work it out for him precisely but you will see from the above that the maximum statutory redundancy pay is 1.5 times 20 times £240, namely £7,200.

However, if the claimant is over the age of 64, his redundancy payment will be reduced by one-twelfth for each complete month over that age. Accordingly, a person over the age of 65 will not be entitled to any redundancy at all.

Your friend might want to consider whether he has been selected for redundancy in accordance with the correct selection criteria within a continuing job function, if any. This is a substantial topic in itself and really outside the scope of your enquiry.

Redundancy pay is a statutory entitlement to be computed in accordance with the statutory method of calculation described above and is not usually negotiable.

However, there may be room for negotiation where there is an argument for alleging that the person concerned has been wrongly selected for redundancy and is really being unfairly dismissed - for example if his position is being filled by someone else and not absorbed elsewhere within the organisation concerned.

Furthermore, some emp-loyers have established their own tailor-made schemes for redundancy and severance pay, which may have become contractual if incorporated into the individuals terms of employment. They may have been established through custom and practice where, as a matter of policy, an employer has in the past invariably adopted a practice of 'topping up' the statutory amount but whether there is any room for negotiation in such cases depends on the nature of the special scheme concerned.

First published January 2002