Where an employee has recently changed from full-time to part-time hours how should their redundancy payment be calculated?
If an employee has changed from full-time to part-time hours, where this was a permanent contractual change and their normal working hours are now the part-time hours, the whole redundancy payment will normally be calculated based on the reduced part-time salary.
Section 135 of the Employment Rights Act 1996 entitles an employee to receive a statutory redundancy payment if they are dismissed by the employer by reason of redundancy and meets the relevant qualifying conditions. A redundancy payment is based on "a week's pay" (subject to the statutory cap) and takes into account the employee's age and the number of years of employment. Years of employment count equally for this purpose regardless of whether the employee worked full time or part time.
To calculate a redundancy payment, the employer must first determine the period, ending with the relevant date (ie the date on which the notice of redundancy expires or, if statutory minimum notice is not given, the date on which the minimum notice period would have expired if given), during which the employee has been continuously employed. It must then work backwards from the end of that period to calculate the number of complete years of employment falling within that period. Finally, the employer must allow the appropriate amount for each of those years of employment. The appropriate amounts are: one and a half weeks' pay for each year of employment in which the employee was aged 41 or over; one week's pay for each year of employment in which the employee was aged between 22 and 40; and half a week's pay for each year of employment in which the employee was aged 21 and under.
Sections 221 to 224 then set out how to calculate "a week's pay". This is somewhat complicated and depends on whether the employee has normal working hours or not. It is assumed here that the employee does have normal working hours.
If the employee's normal working hours are the same every week and their wages for employment in normal working hours do not vary with the amount of work done, the amount of a week's pay is the amount that is payable by the employer under the contract of employment in force on the calculation date if the employee works throughout their normal hours in a week.
If the employee's wages do vary with the amount of work done but the number of normal working hours does not vary, the amount of a week's pay is the amount of pay for the number of normal working hours in a week calculated at the average hourly rate of pay payable in respect of a 12-week period ending with the last complete week before the calculation date (or, where the calculation date is the last day of a week, with that week).
Where the employee is required under the contract of employment to work during normal working hours on days of the week or at times of the day that differ from week to week or over a longer period (so that pay varies from week to week), the amount of a week's pay is based on the average pay and the average number of hours worked in the last 12 weeks before the calculation date.