Will I lose my redundancy payment if I start a new job?
That’s a good question. Starting a new job can be stressful enough without the worry of losing your redundancy payment.
This article explores the whole situation.
Offered alternative work
If your role has been made redundant, your employer might offer you alternative employment rather than paying you to leave.
They must give you enough detail about the job so you understand what you’d be doing and how it would differ from your current job.
They can make the job offer either verbally or in writing, but it must happen before your old job ends, and the new job must start within four weeks of the old job ending.
If you decide to accept the alternative job…
- If you decide to accept the alternative job, you must do it in writing. Your employer must give you a new employment contract, new job description, and written details of any changes to your pay or terms and conditions
- You can try the alternative job/s for four weeks to decide whether you like it (including time you’re off sick or on holiday)
- If you need training, the trial period can be extended (ensure you get this in writing, with clear start and end dates)
If you decide against accepting the alternative job…
- If the new role is not suitable, you can refuse to accept it (you need a good reason to turn it down, perhaps because it pays less, negatively affects your health or family life, is in an inconvenient location, or isn’t the same type of work you’re used to doing)
- Tell your employer in writing that you don’t want the alternative job – you must do this within 4 weeks before your old job ends, or 4 weeks before the trial of the alternative job ends
- Ask about redundancy (if you’ve worked there for at least two years)
Taking redundancy
OK, so let’s say your role has been made redundant and there’s no suitable alternative work at the same employer. You’ve lost your job and you need to find a new one, but remember, you only get redundancy pay if you’ve worked there for two years or more.
As part of the redundancy process, you’ll be offered a settlement agreement (known as a compromise agreement in Northern Ireland).
If you accept it, you agree not to take your employer to the employment tribunal in return for a payment. You might also agree to other restrictions.
Settlement amount
The amount of the settlement is usually made up of a lump sum plus your pay plus other benefits you’re owed such as holiday pay.
The first £30,000 is tax-free, so you get to keep it all (which can help keep you going while you’re looking for a new job).
We help employees negotiate settlement agreements that are fair. Your initial call is absolutely free and with no obligation to proceed.
Working your notice
Some settlement agreements include ‘PILON’ which stands for Payment In Lieu Of Notice. This means you don’t have to work your notice period and will be paid for it anyway.
This is an element of the settlement we can help you with. For example, you might want to leave immediately and get on with job-hunting. At the very least, you might want the right to take time off to go to interviews so you’re not out of work for too long between jobs.
This is just one of the considerations we can support you with as part of your negotiations.
Restrictive covenants
If the agreement you signed includes a restrictive covenant, it may mean you can’t work for a competitor, or in a certain geographic area, for a certain amount of time.
The restrictions should not be too severe, that is, not too broad or long-lasting. It’s not in anybody’s interests for you to be out of work for too long.
Check the details carefully to ensure your new job is allowed. If you start your new role against the terms of the agreement, you’d be in breach of contract and your former employer could take action against you.
It can be complex, so if you’re not sure whether it’s safe to accept your new job offer, give us a call. We might be able to get your old employer to waive the restriction.
References
New employers often want to know what your previous employers said about you. However, it’s not a legal requirement for any employer to give you a good reference.
If they weren’t happy with your performance at work, the employer might provide a ‘standard’ reference that states your job title and the dates you worked there but doesn’t mention anything else.
A clause that can work in your favour as part of a settlement agreement is one where your employer agrees to give you a reasonable reference to help you get a new job.
It’s worth negotiating that as part of your settlement, as it doesn’t cost the employer anything yet can help change your whole future.
Confidentiality
Another aspect you can negotiate is a promise to keep the deal a secret. Employers often want that (so will pay extra to achieve it), and it costs you nothing to agree.
Reason for leaving
The agreement might not give a reason why you’re leaving, or it might say ‘redundancy’ or ‘by mutual agreement’.
Legal advice
Because a settlement agreement is legally binding, you must take independent legal advice before you sign it – and the good news is that your employer will usually pay.
As employment lawyers, that’s one of the things we do all the time. We act for employees anywhere in the UK who are negotiating and signing a settlement agreement.
Can’t find a new job?
You can get careers advice from places such as the National Careers Service. While you’re job-hunting, you might be eligible for benefits such as Job Seeker’s Allowance or Universal Credit.
Unfair redundancy
Note that your employer must follow a fair process when they make your role redundant. For example, they must offer you suitable alternative employment if they can, and allow you four weeks to try the new role.
Also, if 20 or more employees are being made redundant at the same time, the employer must carry out group consultation with a representative such as someone from the union.
If they fail to do any of this, you might be able to take them to the employment tribunal and win compensation.
What to do
As with many employer/employee disputes, the best thing to do is start with an informal conversation. Talk to your boss, or HR department, or union representative, to see if you can find a solution that works for both sides.
If you’re not happy, go through your employer’s grievance procedure. You’ll find details of how to do this in your staff handbook or employment contract.
If that doesn’t work, you’ll need to go to Acas for early conciliation. This is a necessary step that aims to avoid the hassle and expense of making a claim at the employment tribunal. It’s free (because it’s funded by the Government), but you must talk to Acas within six months less one day from the date you turned down the offer of an alternative job or from the end of the trial period for the alternative job.
Early conciliation can take up to six weeks. If you still can’t reach agreement, you can make a claim at the employment tribunal for statutory redundancy pay, or for breach of contract if the employer blocked you getting a new job you thought you were entitled to, or for any other behaviour that’s unfair.
You can talk to us at any phase of this process. We’ll tell you your chances of succeeding and what to do at each step.
Related reading
For further information on this topic, you might like to read our related articles. These include:
- Can I be made redundant during maternity leave?
- Being made redundant from your public sector job?
- Have I been made redundant?
- Was it fair to make you redundant?
- Have you been made redundant?
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