Can an employee who is re-employed after having been made redundant retain their statutory redundancy pay?
An employee who is re-employed after having been made redundant can retain their statutory redundancy payment, whether or not they are immediately re-employed or return to work for the same employer at a later date. However, under s.214 of the Employment Rights Act 1996, the receipt of the redundancy payment will break the employee's continuity of employment for the purposes of the statutory redundancy pay scheme. Therefore, if the employee is made redundant again in the future, they will not be entitled to a statutory redundancy payment until they have accrued another two years' service. The statutory redundancy pay calculation will be based on the latter period of service only.
An employer should be cautious if there is no break in employment between termination on the grounds of redundancy and the employee recommencing work. This may cast doubt over the genuineness of the redundancy and may cause HM Revenue and Customs to question the tax-free status of the redundancy payment. The employer should therefore ensure that it can demonstrate that the redundancy was genuine.