Redundancy pay for a trades firm: 2 years' service, a £751 weekly cap and a £22,530 ceiling, worked at £560 and £900 a week

The Hendon job has finished and the next contract is not signed. You have a labourer with five years and a foreman with ten. Notice is one cost. Does the law also make you pay a redundancy payment, and how much?

What GOV.UK says

The GOV.UK page on redundancy pay gives these rules:

Check the ceiling: 20 years x 1.5 weeks = 30 weeks, and 30 x £751 = £22,530. The page's maximum is therefore the top of the table, reached only by someone with 20 years counted, all at 41 or older.

What it costs at £560 and £900 a week

A labourer on £14 an hour for 40 hours earns £560 a week (14 x 40 = 560), under the cap. Take someone who started at 25, so every year is in the one-week band.

A foreman on £900 a week is over the cap, so £751 is used. For 10 years in the one-week band:

• Uncapped: 10 x £900 = £9,000
• Capped: 10 x £751 = £7,510
• Difference: £9,000 - £7,510 = £1,490

The five-year labourer in the opening is owed £2,800 of redundancy pay in addition to the notice weeks, which are a separate cost: see the minimum notice a trades firm must give. On the notice page's figures, his notice is 5 weeks, £2,800, so the two together come to £5,600 (2,800 + 2,800).

What to put in place

• Keep each worker's date of birth and start date in one place, so the age bands and full years are a count, not a memory.
• Keep the last 12 weeks of pay for each person; the page uses that average.
• Price it into a contract before you take on a long-serving crew, as you would holiday or sick pay.

What I did not read

I read the one GOV.UK page. I did not read how a part year, overtime, or pay that varies week to week is averaged beyond the 12-week sentence, how a gap in service is treated, which of the age bands applies when a birthday falls inside a year of service, whether the payment is taxed, or what the earlier, lower caps were. I did not read the legislation or what makes a dismissal a redundancy at all. Ask your adviser before you act on a real case.

Overlyft builds AI staff who join your trades team and keep each worker's start date, birth date and recent pay, work out the redundancy figure and the notice cost when a contract ends, and put both in front of the office manager, who decides what to do.

This is general information, not tax or legal advice. Check the GOV.UK page and your adviser for your own firm.