Redundancy - weekly pay

specialk1972

Hi,
My partner has been told he’s being made redundant and has been on furlough. 

The redundancy calculation he’s been given doesn’t match what we’ve worked out. We have done the annual salary (basic) divided by 52.

However, his employer have done some weird calculation, detailed below:

• Hourly rate is £12.20 amount If you take the hourly rate out of it then £salary / 366 (leap year) * 7 = £535.52.
• On a standard year this would be £536.99, the way Its been calculated it works out as £536.80 which is in the middle due to rounding the hourly rate.
• I stated £536.80 x 52 = £27,913.60.  There’s 52.14 weeks in the year, which brings it much closer to £28,000

The weekly amount isn’t far away from the weekly capped rate but it’s the principal. 

Are they trying to pull the wool over with this calculation, should it legally or HMRC recommended just be salty divided by 52 weeks?

he’s got his meeting on Monday at 10am so any quick responses would be very grateful.

thanks

Semple

From the sounds of your calculations are very close. How much have they outlined he'll get, and how much have you calculated he'll get? 

Jeremy535897

It is not clear from your post whether he is entitled to statutory redundancy, or redundancy under his contract of employment. The government only lay down rules for the minimum statutory entitlement, which is based on weekly pay, capped at £538 a week:
"How it’s worked out

Pay is capped at £538 (£560 in Northern Ireland) per week. Length of service is capped at 20 years.

The maximum amount of statutory redundancy pay is £16,140 (£16,800 in Northern Ireland)

Years of service or earnings over these amounts aren’t included in the calculation.

You can’t get less than the statutory amount but you may get more if your employer has a redundancy scheme. Redundancy pay up to £30,000 is tax-free.

You get:

• 0.5 week’s pay for each full year worked when you’re under 22
• 1 week’s pay for each full year worked when you’re between 22 and 41
• 1.5 week’s pay for each full year worked when you’re 41 or older"

specialk1972

Hi guys,
he is entitled to statutory redundancy and has worked for 9 full years.
we worked out that his salary divided by 52 came to 538.40 so as it’s capped at £538 he’d get that multiplied by the number of years service (weekly and week and half depending on age etc).

There isn’t a huge difference £36 in total for redundancy pay only (there is also a difference for notice pay) but we wanted to know if the calculation they have carried out is correct/recommended or should it just be salary divided by 52?

Surely, most employees aren’t going to use that complex calculation to work out weekly pay? 

Jeremy535897

The Employment Rights Act 1996 sets out the calculation of statutory redundancy pay. Section 162 (the relevant part) says:

"162 Amount of a redundancy payment.

(1)The amount of a redundancy payment shall be calculated by—

(a)determining the period, ending with the relevant date, during which the employee has been continuously employed,

(b)reckoning backwards from the end of that period the number of years of employment falling within that period, and

(c)allowing the appropriate amount for each of those years of employment.

(2)In subsection (1)(c) “the appropriate amount” means—

(a)one and a half weeks’ pay for a year of employment in which the employee was not below the age of forty-one,

(b)one week’s pay for a year of employment (not within paragraph (a)) in which he was not below the age of twenty-two, and

(c)half a week’s pay for each year of employment not within paragraph (a) or (b).

(3)Where twenty years of employment have been reckoned under subsection (1), no account shall be taken under that subsection of any year of employment earlier than those twenty years."

A week's pay for someone whose pay does not vary is calculated under section 221 as follows:

"221 General.

(1)This section and sections 222 and 223 apply where there are normal working hours for the employee when employed under the contract of employment in force on the calculation date.

(2)Subject to section 222, if the employee’s remuneration for employment in normal working hours (whether by the hour or week or other period) does not vary with the amount of work done in the period, the amount of a week’s pay is the amount which is payable by the employer under the contract of employment in force on the calculation date if the employee works throughout his normal working hours in a week."

There are other rules where pay varies, for example where there is contractually paid overtime.

[Deleted User]

specialk1972 said:

Surely, most employees aren’t going to use that complex calculation to work out weekly pay? 

Just because "most employees" do not use the more complicated method does not mean thay it is not correct and I am not 100% sure which method is correct.

You could use the government's own calculator and see what you get.
https://www.gov.uk/calculate-employee-redundancy-pay

It does seem however that you are choosing to be particularly difficult, especially when the difference is at most £36, it seems like you are trying to pick a fight over nothing, for no other reason than you have decided you want a fight.

sharpe106

try using the calculator see what you get

https://www.gov.uk/calculate-your-redundancy-pay

specialk1972

Hi all, 
again thank you for all the advice. We have used the calculator on the Gov website....but, it leaves you to work out your weekly pay and this is what isn’t clear. Is there a standard way of calculating that for redundancy and other purposes and is it as easy salary divided by 52 weeks?

@MadMattUK we are wanting to be difficult, we just want to make sure that things are being done properly, it is only £36 and if that’s right then we will accept that, we just think the way they have calculated seems very complex

[Deleted User]

specialk1972 said:

Is there a standard way of calculating that for redundancy and other purposes and is it as easy salary divided by 52 weeks?

Largely no, not in relation to the calculation of "weekly pay". Your method is easier, but less accurate, their method is slightly more complicated (although still easy) but more accurate. As far as redundancy is concerned some companies will use one, some will use the other, though the method the company are using is more accurate.

specialk1972 said:

@MadMattUK we are wanting to be difficult

This is the part that I do not understand. You are expending time and effort being difficult to argue over £36, an amount which equates to 0.007% of the calculated payout.

specialk1972 said:

we just want to make sure that things are being done properly, it is only £36 and if that’s right then we will accept that, we just think the way they have calculated seems very complex

They are being done "properly", their method is actually doing it more "properly" than yours. Your method is a rough calculation, a ready reckoner, theirs is an accurate calculation. You want an "easy" method, they want an "accurate" method, rarely are those two the same. Much like calculating KMH to MPH the easy method is to divide the KMH figure by 0.6 to get the MPH, but to get an accurate figure you would have to divide by 0.6213711922. The first method is perfectly adequate for an approximate figure and would be fine for driving on the roads of France for example, the second would be required when launching a rocket into orbit, as the first would involve you either overshooting or potentially failing to reach orbit. Your method was fine to give you a rough estimate, theirs is correct to give an accurate final figure. 

specialk1972

@MadMattUK
thank you so much for explaining, these are the details we wanted to check and are now satisfied it’s all correct.

much appreciated and thanks to others for their help

Grumpy_chap

I am confused by the OP as to whether the earnings are stated as an hourly rate or an annual salary. 

The basis to start the calculation should be whatever is stated in the contract of employment, i.e. hourly rate OR annual salary (but it is not practical to mix them both up).

If the salary is paid on an hourly rate, then the weekly pay is simply (hourly rate) x (hours per week).  I assume as the question is being asked, there is no hourly rate and the salary is paid on an annual salary.

If that is correct, then the contract of employment (or handbook) may provide guidance as to how the hourly rate is calculated.  Often, when employees are on annual salary, there is a calculation provided for daily rate as this is needed if people are off sick, unpaid leave, too little leave, etc.  From that daily pay calculation, weekly pay is simple based on number of days worked per week.

The calculation used for redundancy and notice pay should be the same as stated in the contract of employment.

That said, as other have pointed out, the difference is minor in the grand scheme of things and efforts may be better expended focusing on the long-term future than building resentment with the past.