All About Non-Statutory Redundancy Pay

Statutory Redundancy Pay is what your employer has to give you by law if you are made redundant, provided you meet the qualifying conditions (normally two years of service). Non-Statutory Redundancy Pay, also often called contractual redundancy pay, is what your employer chooses to pay you above and beyond that.

Non-SRP replaces SRP altogether. You don’t get both at the same time. By law, non-SRP must be more generous than SRP, otherwise SRP applies. Why would employers choose to be more generous than required by the law? Usually, because it says they have to in your contract of employment.

Occasionally, a company will go beyond your contract entitlement and offer something even more generous. Why? There could be any number of reasons ranging from maintaining a reputation as a good employer, keeping up morale in the part of the workforce which remains or even getting departing employees to sign an agreement saying they won’t take legal action against their former employer.

How Does Non-Statutory Redundancy Pay Differ From Statutory Redundancy Pay?

You might think that Non-Statutory Redundancy Pay packages, since they are a private contractual matter, might exist in a wide variety of forms, some of which could be significantly different from the typical structure of Statutory Redundancy Pay. In fact, however, Non-statutory Redundancy Pay packages tend to follow the same basic outline as the SRP packages. Departing significantly from the statutory conditions would invite discrimination complaints.

Typically, Non-SRP packages accept the same basic qualifying criteria, such as the age banding, as the SRP arrangements, and will offer the enhancements simply as a multiple of the SRP entitlement. For example, a Non-SRP package may offer three weeks’ pay where the SRP entitlement is only one. Sometimes eligibility for Non-SRP is extended slightly compared to SRP. For example, it may apply to employees with only one year of service instead of two.

Non-Statutory Redundancy Pay and Taxes

Employees have strict rights and certain legal privileges in relation to Statutory Redundancy Pay. How do those carry over into the field of Non-Statutory Redundancy Pay? With SRP, you can receive payments of up to £30,000 free of tax. This same figure applies to non-SRP.

Note, however, that there are some circumstances where it does not. Occasionally, employers will negotiate an enhanced redundancy package, which involves additional payments, with their employees, usually through their trade union, and codify the new agreement as an alteration to the existing contract of employment. There have been cases where the tax authorities did not regard the resulting payment as meeting the definition of “not arising from the employment” as required by the statute which grants the tax exemption.

Non-Statutory Redundancy Pay and Employment Tribunals

Employees have the right to take disputes about the amount of SRP they will receive, or their eligibility for it, to an Employment Tribunal. But is this also true in relation to contractual redundancy payments? Yes, it is. Note, however, that the time limits are different in each case. Complaints about SRP payments must be made within six months of the time at which the payment should have been made. Complaints about contractual redundancy payments, however, must be made within three months as they are breach of contract issues. This is the general rule, but there are some exceptions to it.

Non-Statutory Redundancy Pay – Conclusion

Statutory Redundancy Pay tends to be rather meagre. Fortunately, some employers choose to do the right thing by their employees and offer enhanced contractual redundancy pay.