WFM UK: Calculating Statutory Redundancy Pay

Overview

This article provides an overview of statutory redundancy pay (SRP) and shows how to extract useful information from HR & Payroll to help with calculations. In any situations where redundancies are being made, employers should always seek advice from legal representatives or professional bodies such as ACAS or CIPD.

Statutory Redundancy Pay

The amount of SRP an employee is entitled to depends on their age, the amount of time they have worked for the company, and their weekly pay amount. An employee must have worked continuously for at least 2 years to be entitled to SRP.

The current guidelines state that the total amount that employees will get is: 

• Under 22 years old – 0.5 week’s pay for each full year of service
• 22 to 40 years old - 1 week’s pay for each full year of service
• 41+ years old - 1.5 week’s pay for each full year of service

The maximum number of years that can be considered is 20 years. 

When working out the number of statutory redundancy weeks due, work out the number of years in each age bracket the employee had during their employment. For example, if they have 10 years’ service and are 30 years old, they would have 2 years under 22 (2 half weeks) and 8 years between 22 and 40 (8 full weeks) giving a total of 9 full weeks’ redundancy due. 

An online calculator is available here https://www.gov.uk/calculate-your-redundancy-pay

Weekly Pay

Employees with Fixed Salaries

For salaried employees, the weekly rate is typically worked out using the annual salary divided by 52.

Employees with Variable Hours

Weekly pay should be calculated using an average of the hours worked over the previous 12 weeks. If employees have been furloughed, the last 12 weeks that they actually worked should be used.

Bureau Customers  

Your Payroll Specialist will calculate the average weekly earnings for employees who are being made redundant. Please contact your Specialist for more information.

Calculating Salaried Weekly Pay

There are several reports available within HR & Payroll that can help with calculating the weekly rate for salaried employees. 

Using a customised report is recommended, one which can provide all required information in a single export. 

• To create a customised report, go to HR > Reports > Customised reports > Create Template
• Enter the Template Name
• From the Report Type drop-down, select Employee Details Report
• Select Save

 
Fig.1 - Creating a customised report 

• On the next page, use the Return tickboxes to select the data fields to be returned in the export
• Enter the order in which the fields will be returned, using the Sequence column
• Select any required Conditions – for example, to show current employees only, select '=' against the Status field
• Select Save to go through each of the pages
• Select Run Report 

Fig.2 - Selecting fields, sequence, condition for the customised report

Suggested fields to select are: 

• Employee Number
• First Name
• Surname
• Status (use = condition to return current employees only)
• Location
• Division
• Job Title
• Paid by Rota (Use = condition and select no to return salary paid employees only)
• Salary
• Start Date
• Length of Service _Years
• Date of Birth
• Age

This information can be used to calculate the weekly SRP owed to salaried employees, along with calculating the number of weeks to be paid. 

Identifying 12 Weeks Average (Hourly)

There are several reports that can be run to establish what hours were worked over the past 12 worked weeks for variable hour employees. 

Employee Hours Worked Export 

• To view the Employee Hours worked export, go to Rotas > Reports > Exports > Employee Hours Worked
• Select Location and Division
• Enter the date range
• Select Run Report

The export will download as a .csv file and show the following information: 

• Location
• Division
• Employee Number
• Surname
• First Name
• Status (full time, part time, flexible etc)
• Hours under each day selected
• Pay Rate
• Total Hours
• Extra Payments
• Additional Payments
• Overtime Hours
• Bank Holiday Hours

Payroll Payments by Pay Basis 

• To view the Payroll Payments by Pay Basis export, go to Payroll > Reports > Exports > Payroll Payments by Pay Basis
• Select Company, Location, Division
• Select Pay Basis
• Select Pay Run (an export will need to be run for each pay run)
• Select Run Export

 The export will download as a .csv file and show the following information: 

• Processing Date (pay date)
• Pay Period
• Location
• Division
• Employee Number
• Employee Surname
• Employee Forename
• Contract
• Payment Type
• Units
• Rate
• Total Payment

Custom Report

• To build a custom report, go to Payroll > Reports > View reports > Create Template
• Enter a Template Name
• Select the Report type – if the 12 weeks spans two tax years, two separate custom reports will be required

Fig.3 - Creating a custom report for hourly pay data

• On the Next page, select the data fields that need to be returned on the export.
• Enter the order for the fields to be returned in Sequence
• Select any required conditions (for current employees only, select an = sign under Condition next to status)
• Select Save to go through each of the pages
• Select Run Report

Fig.4 - Selecting fields, sequence, condition for the hourly data customised report

 Suggested fields to select are:

• Employee Number
• Firstname
• Surname
• Location
• Division
• Job Title
• Company
• Pay Basis
• Tax Year (adding an = as a condition will allow a search for a specific tax year)
• Pay Period
• PaymentDescription (payment type name)
• PaymentUnits
• PaymentRate
• PaymentVale
• PayslipElementID (if reporting on payment types, please ensure this is always selected)
• Status (adding an = as a condition will allow a search for current employees only)
  

Calculating Average Weekly Pay

Once the details of the last 12 weeks pay have been gathered, add the gross amounts up, then divide by 12 weeks to calculate the average weekly pay. 

After the average weekly pay has been calculated, a new custom report can be made within the HR module to report on both age and length of service. Please see the 'Calculating Salaried Weekly Pay' section of this article for more information. 

Holiday Accrual

As well as SRP, employees are entitled to their accrued holiday. Customers with the 'Final Holiday Pay' setting turned on will have the holiday paid out automatically when the termination date is entered. If this setting is turned off, or customers want to get the data beforehand, a custom report can be created.

The steps below show how to create a custom report which can be run to report on employee’s holiday accrual. 

• Go to HR > Reports > Customised Reports > Create Template
• Add a Template Name
• Select Holiday Data from the Report Type drop-down
• Select Save to proceed

 
Fig.5 - Custom Report template

• As with previous examples in this article, on the next page make selections for Return, Sequence and Condition as required
• Select Run

The export will download as a .csv file and once created in Customised Reports, it can be accessed again at any time.

Making Payments

In April 2020, legislation around redundancy payments changed so that any payments over £30,000 are subject to Class 1A National Insurance. This category of National Insurance is an employer's cost and is usually associated with benefits in kind. 

In line with the change of legislation, Fourth introduced a new setting within payment types to help manage this additional employer cost. Please see WFM Release Note - Termination Payments for more information.