What is the true cost of redundancy?
- By Ross Brinsdon (TLA)
- •
- 26 May, 2020
- •
In light of this , we have had many clients that are employers asking how much they would be required to pay in the event that they may need to make redundancies in their respective businesses. The basic HMRC advice is detailed below; but please feel free to contact us if you would like any assistance.
You’ll normally be entitled to statutory redundancy pay if you’re an employee and you’ve been working for your current employer for 2 years or more.
You’ll get:
- half a week’s pay for each full year you were under 22
- one week’s pay for each full year you were 22 or older, but under 41
- one and half week’s pay for each full year you were 41 or older
Length of service is capped at 20 years.
If you were made redundant on or after 6 April 2020, your weekly pay is capped at £538 and the maximum statutory redundancy pay you can get is £16,140. If you were made redundant before 6 April 2020, these amounts will be lower.
To calculate your redundancy pay; follow the HMRC link > Calculate your redundancy payPlease note that redundancy pay (including any severance pay) under £30,000 is not taxable.
The links below provide more information should this be something you think may affect you or your business; HMRC and ACAS (The Advisory, Conciliation and Arbitration Service):
HMRC - https://www.gov.uk/redundancy-your-rights/redundancy-pay
ACAS - https://www.acas.org.uk/redundancy
If you have any specific questions in relation to redundancy please contact the TLA Payroll and HR Team by email or phone and we will discuss your query.
If you’re part of a working household that receives tax credits, you may be eligible for a new one-off payment of £500. The new payment is being introduced to provide extra support when the temporary increase in Working Tax Credit ends as planned on 5 April 2021.
You may get a one-off, tax-free payment of £500 if, on 2 March 2021, you were getting either:
- Working Tax Credit
- Child Tax Credit and were eligible for Working Tax Credit but you did not get a payment because your income is too high to get Working Tax Credit payments
You do not need to contact HMRC or apply for the payment. HMRC will contact you by text message or letter in April 2021 to confirm you are eligible.
If you are eligible, you should get your payment direct to your bank account by 23 April 2021. HMRC have confirmed that you will not see the payment on the online tax credit service.
The payment is non-taxable and will not affect your benefits. You do not need to declare it as income for Self-Assessment tax returns or for tax credit claims and renewals.
