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This Practice Note considers when an employee may be entitled to a redundancy payment under a contractual redundancy scheme (enhanced or occupational redundancy scheme or redundancy policy) and the interaction with the statutory redundancy scheme. It outlines the enhancements that are typically offered by employers. It also considers potential issues such as whether an employer can defeat entitlement under an enhanced redundancy scheme by giving notice to employees for another, non-redundancy reason. Remedies, age discrimination and taxation issues are also examined.

Under the Employment Rights Act 1996 (ERA 1996), an employee who is dismissed by reason of redundancy after two or more years’ continuous employment will be entitled to a statutory redundancy payment, based on their age, length of service and average weekly pay, subject to a cap.

For further information, see Practice Note: Entitlement to statutory redundancy payment.

However, it is relatively common for employers, particularly larger employers and those that are unionised, to pay redundancy payments to redundant employees in excess of the statutory redundancy payment. These are often known as enhanced redundancy payments.