Labour Research July 2011

Law Queries

Redundancy pay

Q. Our employer is carrying out a redundancy exercise but it is not offering redundancy pay in excess of the statutory minimum. However, what concerns us most is the fact that a number of our members’ have fluctuating earnings. That is to say, due to fluctuating shift patterns, their earnings alternate between being around the £1,000 a month mark, to around the £2,000 a month mark. On what earnings should their redundancy pay be calculated?

A. Where earnings fluctuate, the base figures to use for calculating redundancy pay are neither the maximum nor the minimum figures earned. Instead an average is taken. Where an individual’s earnings fluctuate, you will need to look at their earnings over the previous 12 weeks.

On the basis of the figures you have given (and assuming that there is no right to contractual redundancy pay — perhaps acquired by virtue of custom and practice) the timing of the redundancy will be critical.

For example, roughly speaking (as a calendar month is longer than four weeks), the individual’s redundancy pay will either be calculated by dividing around £5,000 (£2,000 plus £1,000 plus £2,000) by 12 (weeks) or around £4,000 (£1,000 plus £2,000 plus £1,000) by 12 (weeks). The former figure may end up being just over the statutory minimum, which is £400 a week at present, while the latter will be significantly under the minimum.

The Directgov website has an online statutory redundancy calculator at: