Redundancy can be a challenging experience for employees, but understanding redundancy payments can help ease financial uncertainty. A redundancy payment is a form of compensation provided to employees who lose their jobs due to reasons beyond their control, such as company restructuring, downsizing, or business closure.



In this article, we’ll explore what redundancy payment is, who is eligible, how it is calculated, and the legal rights of employees.



What is a Redundancy Payment?

A redundancy payment is financial compensation awarded to employees when their job position becomes unnecessary due to economic downturns, automation, relocation, or business restructuring. It serves as a financial cushion to help employees transition to new employment.



There are two main types of redundancy payments:



1️⃣ Statutory Redundancy Payment (SRP) – The minimum legal amount an employer must pay under employment laws.

2️⃣ Contractual/Enhanced Redundancy Payment – A higher payment agreed upon in employment contracts or company policies.



Who is Eligible for a Redundancy Payment?

To qualify for a redundancy payment, employees must generally meet the following criteria:



✔️ Worked for the employer for a minimum period (often two years, depending on the country’s labor laws).

✔️ Be an employee under a contract of employment (not a freelancer or contractor).

✔️ Made redundant, not dismissed for misconduct or performance-related issues.



However, employees may not qualify for redundancy pay if:



❌ They resign before being made redundant.

❌ They are offered a suitable alternative job by the same employer.

❌ They have worked for the company for less than the required period.



How is Redundancy Pay Calculated?

The calculation of redundancy pay varies depending on local labor laws, but it is typically based on the following: