If you have not been given a statutory 30 days' notice of your redundancy, you are entitled to compensation in lieu of notice.
The government will compensate you for the time you are out of work after your redundancy, for a period determined by your length of service:
- 1 week's notice if you were continuously employed for 1 calendar month or more, but less than 2 years;
- 1 week for each year of employment if you were continuously employed for 2 years or more, but less than 12 years;
- 12 weeks if you were continuously employed for 12 years or more.
However, benefits and/or money earned obtained in further employment during this period after your redundancy will be deducted from your compensation. It is important to claim benefits (ie job seekers allowance) as they will be automatically deducted from your claim even if you have not claimed them.
The statutory maximum that you can claim is £700, and a notional amount of tax is deducted as you would have paid this as tax had you received the notice payment as wages.
Example
You have 12 years' service at a rate of £500 a week. You receive jobseeker's allowance for 12 weeks at £67.50 a week. 22% is the rate for notional tax deductions and the statutory cap on payment is £5,160 (12 x £430).
| Your gross claim is 12 weeks at £500 a week | = £6,000.00 |
| Less 12 weeks' benefits at £67.50 | = £810.00 |
| Your net claim before notional tax | = £5,190.00 |
| Less 22% notional tax | = £1,141.80 |
| Your net claim after notional tax | = £4,048.20 |
| Statutory capped maximum payable | = £5,160.00 |
You would therefore receive your full net claim of £4,048.20 as it is less than the statutory maximum that the government would be able to pay you.
