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Redundancy Payments - Your Legal Rights


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Losing your job can be a harrowing experience more so if you are in debt. Aside from keeping the fire burning, you may also have to deal with your creditors and the debt collection agencies. You can, in times like this, seek debt advice to help you out of your misery.

You are entitled to redundancy pay if you have been with an organisation for two years or more. If you have worked for less than two years, and have selected for redundancy, you will not be entitled to a payout; however, you will get notice pay, which as per law should be at least one week's pay for each year you have worked up to a maximum of 12 weeks.

In case you have been with an organisation for two years or more, the lump sum you receive would depend on factors such as your age, number of years of your service (calculated on a maximum 20 years), and your earnings (capped at £350 a week).

As a rule, you should receive half a week's pay for each year of employment that is if you are under 22 years of age. On the other hand, if you are aged between 22 and 41, you should receive one week's pay for each year of employment. For those 41 and above, the amount should be 1.5 week's pay for each year of employment.

If the organisation you work for is unable to afford your redundancy payment in the short term, you can approach the Redundancy Payments Office that may make the payment from the national insurance fund. In case your organisation declares bankruptcy, the office will make the payment and recover the debt from the organisation later.

Redundancy payments are tax-free up to £30,000. This amount includes the laptop, work car (if you have been entitled to one), or any other equipment you are allowed to keep. However, notice period payments or payments in lieu, may be taxable. You are also entitled to receive your accrued holiday pay as part of the package, but this is also taxable.

Your employer can not dismiss you arbitrarily. To make an employee redundant, the organisation has to follow some procedures. For example, it can lay off people based on scores, which reflect employee performance. Then again, it can follow the ‘last in first out policy’ but this is not usually the case specially in face of the October 2006 discrimination law. However, if you feel your redundancy is unjustified, you can contest your employer's decision both formally and informally.

You can contest it informally, which means you can come to some sort of settlement with your employer by offering to work for shorter hours or by agreeing to a pay freeze.

Alternatively, you can approach an employment tribunal if you feel you have grounds to dispute your employer's redundancy decision. For example, you feel that you have been served notice because of sex discrimination or that you have not been consulted properly under the rules.

Knowing your legal rights can ensure that you get a fair deal. And though you may be feeling angry at your employer, it is advisable to keep a cool head and maintain cordial relations for he may give you tips and support in finding a new job. Then again, you would require references for your next job.

To reiterate, if you are dismissed from your job, you are liable for redundancy payment, provided you have been in service with the organisation for two years or more. If you are in debt, you can use this payment to clear off your loans. You can seek debt advice on managing your finances. For example, if you want to reduce your debts, you should not necessarily pay off your mortgage first. As a rule, unsecured personal loans or credit cards are more expensive, so it would e make better sense to reduce them first. You can seek expert debt advice about different debt solutions including IVA and then decide which one to pay off first.


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