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Mar 2020

16

New Redundancy Changes from 6th April 2020

The new legislation of The Employment Rights (Increase of Limits) Order 2020 was laid to Parliament on 3rd March 2020 and the changes will come into force on 6th April 2020.

In this legislation the maximum amount weekly pay for redundancy payment calculations will increase by £13 from £525 to £538 from 6th April. This law applies to England, Scotland and Wales.

Currently, where an ex gratia payment is made on termination of employment (on top of notice pay), the first £30,000 can be paid free of income tax and any amount above this is taxable. However, the entire payment is currently exempt from national insurance contributions. From 6 April 2020, the first £30,000 of any ex gratia termination payment (including any redundancy payment) will still be free of income tax and national insurance but any amount above this will be subject to Class 1A employer national insurance contributions.

Employees that are employed by their employer for two years or more are normally entitled to statutory redundancy payments. The age of the person can determine the monetary amount they received based on the following:

  • An employee under 22 years of age receives 50% of a week’s pay for each full year of employment
  • An employee aged under 41 and above 21 will receive 1 week’s pay for each full year of employment
  • An employee that is 41 and older will receive 1.5 week’s pay for each full year of employment

In England, Scotland and Wales the maximum an employee can be awarded for statutory redundancy is £15,750 and £16,410 in Northern Ireland. Statutory redundancy payments are capped at 20 years length of services.

In England, Scotland and Wales the maximum an employee can be awarded for compensation for unfair dismissal has increased by £2,075 to £88,519 from 6th April onwards.

An increase of £1 for the employment protection daily rate amount will apply to England, Scotland and Wales from the start of 2020-21. The new daily rate is £30.

At present there are no details of changes to the statutory maximum weekly amount or the employment protection daily rate amount for Northern Ireland. The maximum rate operating in 2019-20 was £547 per week and £29 respectively.

Posted byDebbie ClarkeinPayroll