Redundancy Pay Under 2 Years Service

If you have been working for your employer for less than 2 years and are now facing redundancy, the news that you do not qualify for statutory redundancy pay can be disheartening. Under UK law, you need at least 2 years of continuous service to be eligible for statutory redundancy pay. However, this does not mean you leave with nothing. There are several other entitlements you should be aware of, and in some circumstances, you may still receive a redundancy payment.

This guide explains the 2-year qualifying rule, sets out what you are still entitled to, and covers the situations where you may have additional rights.

The 2-Year Qualifying Period

Section 155 of the Employment Rights Act 1996 states that an employee must have been continuously employed for a period of not less than 2 years to qualify for a statutory redundancy payment. This is a firm rule with no exceptions -- regardless of your age, salary or the circumstances of the redundancy, you cannot receive statutory redundancy pay unless you have at least 2 complete years of service.

Your continuous service is calculated from the date your employment began to the "relevant date", which is usually the date your notice expires or, if no notice is given, the date your employment actually ends. Service is measured in complete years -- 1 year and 11 months does not round up to 2 years.

When Does Continuous Service Start?

Your continuous service normally starts on the first day of your employment. This should be stated in your contract of employment or written statement of particulars. Important points to note:

• Probationary periods count: Time spent on probation is part of your continuous service. There is no legal distinction between probationary and confirmed employment for the purpose of calculating service length.
• Fixed-term contracts count: If you have been on successive fixed-term contracts with the same employer, these normally count as continuous service provided there was no break of a complete week between contracts.
• TUPE transfers count: If your employment was transferred from a previous employer under the Transfer of Undertakings (Protection of Employment) Regulations, your service with the old employer counts towards your continuous service with the new employer.

What You ARE Still Entitled To

Even if you do not qualify for statutory redundancy pay, you retain a number of important rights when being dismissed by reason of redundancy:

1. Notice Period

You are entitled to your statutory or contractual notice period, whichever is longer. If you have been employed for at least one month, you must receive a minimum of one week's statutory notice. If your contract specifies a longer notice period, that applies instead.

Your employer must either allow you to work your notice (and pay you as normal) or make a payment in lieu of notice. Either way, you receive pay covering the notice period.

2. Accrued Holiday Pay

You are entitled to be paid for any statutory holiday you have accrued but not yet taken up to your termination date. This is calculated on a pro-rata basis. For example, if the holiday year runs from January to December and your employment ends on 30 June, you have accrued half your annual entitlement. If you have not taken any holiday, you are owed payment for the full amount accrued.

3. Final Wages

Your employer must pay you all outstanding wages up to and including your last day of employment. This includes any overtime, commission or bonuses that have been earned but not yet paid.

4. Other Contractual Entitlements

Check your contract for any other payments that may be due, such as:

• Commission or bonus payments for work already completed
• Expenses you have incurred but not yet been reimbursed for
• Payments due under any share scheme or long-term incentive plan

Contractual Redundancy Pay May Still Apply

Some employers operate their own redundancy schemes that are more generous than the statutory minimum. These enhanced or contractual redundancy schemes may have different qualifying criteria. In particular, some employer schemes:

• Have a shorter qualifying period than 2 years (some start from day one of employment)
• Use a higher multiplier than the statutory formula
• Do not apply the £719 weekly pay cap (£749 in Northern Ireland)

Check your contract of employment, your employer's staff handbook or redundancy policy, and any collective agreements that may apply. If the employer's scheme provides for redundancy payments with less than 2 years of service, you are contractually entitled to that payment even though you do not qualify for the statutory amount.

Unfair Dismissal Considerations

Ordinarily, you need 2 years of continuous service to bring a claim for unfair dismissal in an employment tribunal. This means that, in most cases, an employee with less than 2 years of service cannot challenge the fairness of their dismissal.

However, there are important exceptions. The 2-year qualifying period does not apply in the following situations, meaning you can claim unfair dismissal from day one:

• Pregnancy and maternity: Dismissal connected to pregnancy, maternity leave, or related reasons is automatically unfair regardless of length of service. Women on maternity leave have additional protections during redundancy.
• Whistleblowing: If you were dismissed for making a protected disclosure (reporting wrongdoing), there is no qualifying period.
• Asserting a statutory right: If you were dismissed for asserting a statutory employment right, such as requesting a written statement of terms or querying your pay, no qualifying period applies.
• Trade union membership: Dismissal for being a member of a trade union, participating in union activities or refusing to join a union is automatically unfair.
• Health and safety: Dismissal for raising health and safety concerns, refusing to work in dangerous conditions or carrying out health and safety representative duties is automatically unfair.
• Discrimination: If the redundancy is a pretext for discrimination based on a protected characteristic under the Equality Act 2010 (age, sex, race, disability, religion, sexual orientation, gender reassignment, marriage/civil partnership, or pregnancy/maternity), you can bring a discrimination claim regardless of length of service.

If you believe your dismissal falls into one of these categories, you should seek legal advice promptly, as strict time limits apply for bringing tribunal claims (normally three months less one day from the date of dismissal).

Is the Redundancy Genuine?

Even if you cannot claim ordinary unfair dismissal, it is worth considering whether the redundancy is genuine. A genuine redundancy occurs when the employer's need for employees to do work of a particular kind has ceased or diminished. If the role is not actually disappearing -- for example, if someone else is being hired to do the same job -- this may not be a genuine redundancy, and other legal avenues may be open to you.

Negotiating a Payment

Even where there is no legal obligation to pay you redundancy money, your employer may be willing to offer a goodwill or ex-gratia payment as part of a settlement agreement. This is particularly common when:

• The employer wants a clean break and certainty that you will not bring any claims
• You have knowledge or skills that make a smooth transition important
• The employer wants to maintain good relations and protect their reputation
• There are potential issues with the redundancy process that the employer would prefer to resolve quietly

If you are offered a settlement agreement, you will need independent legal advice before signing it (this is a legal requirement for the agreement to be valid). The employer will usually contribute towards the cost of this advice.

Claiming Benefits

If you are made redundant with under 2 years of service and do not find new employment immediately, you may be eligible for:

• New Style Jobseeker's Allowance (JSA): Based on your National Insurance contributions, paid for up to 182 days.
• Universal Credit: Means-tested benefit to help with living costs.
• Help with housing costs: Through Universal Credit or other schemes.

You can apply for these benefits as soon as your employment ends. There is no requirement to have received redundancy pay in order to claim.