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Benefits following redundancy No 14
 

A UNISON Scotland Briefing

 

INTRODUCTION

When a worker is made redundant or dismissed they need to know how this will affect them financially. Various state benefits will be available to them, as well as pensions, mortgage and rent assistance, council tax relief, etc.

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REDUNDANCY

Statutory Redundancy Pay

If it is established that a worker is being made redundant, he or she will have certain legal rights including statutory redundancy pay.

To be entitled to statutory redundancy pay a worker must

  • Be employed
  • Be under 65 (or below the normal retirement age
  • Have worked for the firm for at least 2 calendar years since the age of 18 years

Calculation of Statutory Redundancy Pay is dependent upon how long a worker has worked for his/her employer; the workers age and weekly wage, and works out as follows:

  • 11/2 weeks pay for each complete year of employment between the ages of 41-65 inclusive
  • 1 weeks pay for each year of employment between the ages of 22-40 inclusive
  • of one weeks pay for each year of employment between the ages of 18 and 21

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Notice of Redundancy

Between one and 12 weeks depending on the length of time employed

Time off to look for work

Workers who are being made redundant are entitled to reasonable paid time off to look for a new job.

"Before you go" checklist

In addition to Statutory Redundancy Pay, before they leave their job workers should ensure that they receive the following from their employer:

  • Payment in lieu of notice (See Jobseekers Allowance)
  • Outstanding Wages
  • Holiday Pay
  • Income Tax P45
  • A letter stating the date they were made redundant
  • References for future job hunting

In most cases pensions are not paid out on redundancy. If, however, the worker is within 10 years of retirement, many schemes will allow them to take an early pension, which may even include a lump sum.

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DISMISSAL

There are several reasons for dismissal. It is necessary to ascertain whether the worker has actually been dismissed, or whether he/she has resigned, been made redundant, suspended, etc. It is also necessary to assess whether a claim for unfair dismissal should be lodged.

If a worker has been dismissed for industrial misconduct, or resigned from their job, they will be "sanctioned" which means they will not receive Job Seekers Allowance for between 1 and 26 weeks, depending on circumstances.

In addition, if a claim for unfair dismissal is upheld, compensation may cover a period in which JSA was paid. In such cases the amount of JSA may have to be paid back out of the compensation award.

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state benefits

Job Seekers Allowance (JSA)

This is a benefit for unemployed people who are capable of work.

There are two types of JSA contribution-based (non means-tested) and income-based (means-tested).

Contribution-based JSA depends on the status of the worker's National Insurance Contributions (NICs) NICs will have had to have been paid for one of the last two complete benefit years before the tax year in which JSA is claimed, and have contributions or credits for both benefit years. JSA is paid for six months (max). 18-24 year olds receive a lower rate, although they have to meet the criteria above, and no dependants' additions are paid. Redundancy pay does not affect contribution-based JSA. However, if payment in lieu of notice or holiday pay has been received, JSA will not be paid for that time.

Current rates*: Under 18 - £31.45

(*April 2000) 18-24 - £41.35

25 or over - £52.20

Income-based JSA is for unemployed people who have not paid enough NICs to receive contribution-based JSA or where this amount would not be sufficient to live on, e.g. where there are dependants. Income-based JSA is based on income and is not available to anyone with more than £8,000 of capital. Any capital over £3,000 is taken into account and will reduce the level of benefit given. Redundancy pay almost always counts as capital in this calculation.

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Income Support

Income Support is a means-tested benefit paid to certain groups of people who do not have enough money to live on. If someone is not eligible for JSA and has no other source of income in their family, they may be able to claim this benefit.

Assistance with Mortgage, Rent, Council Tax

Owner-occupiers may be able to get mortgage interest paid via income-based JSA.

Housing Benefit is a government scheme which helps people pay their rent and related costs.

Council Tax Benefit and second adult benefit are payable to people on income-based JSA whose capital is under £16,000

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Working Families Tax Credits

If a worker obtains a low paid job, WFTC may be payable, depending on income and capital.

How to Claim Benefits Listed Above

To claim JSA, an unemployed person should go to her/his local Employment Service Jobcentre, which will be listed in the local telephone directory. The person will have to fill in forms, produce evidence, and attend an interview with a new claims adviser who is a member of staff at the Jobcentre. The person and any partner included in the claim will have to provide her/his National Insurance (NI) number, or evidence which will enable it to be identified. If s/he does not have a NI number, s/he should apply for one.

Whilst making the claim for JSA the person will be given claim forms for Housing Benefit and Council Tax Benefit.

To continue receiving JSA the claimant will be required to attend the job centre regularly to show that they are still available and requiring work (signing on). Failure to do this at the intervals laid down may also result in benefit being suspended.

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FURTHER INFORMATION

Citizen's Advice Bureau Scotland Advice Guide

At www.adviceguide.org.uk/nacab

Labour Research Department booklet: State Benefits 2000

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