Redundancy payments and benefits

03 June 2020.

Redundancy payments may affect when benefit payments start. How this works has changed over time. If you've had a redundancy payment, you can ask us to check if we treated this correctly.

Information

There are no stand-downs from 23 March to 23 November 2020. This is part of the Government’s response to COVID-19. During this time your redundancy pay won’t affect when your benefit payments start.

Calculating the date benefit payments should start is complex.

  • Some final payments, such as holiday pay and pay in lieu of notice, affect when a person becomes eligible for a benefit, while redundancy payments don't.
  • Before 23 March 2020, people may have had a stand-down period, and redundancy pay can affect how long the stand-down is. The rules around this have changed several times over the past 30 years.
  • How we work out the date you become eligible for a benefit

    To work out when you become eligible to get a benefit after you’ve been working, we'll consider:

    • any holiday pay or retirement pay
    • sick leave or other leave you were paid
    • any pay you got in lieu of notice
    • any payments you got at the end of a fixed-term contract.

    If you got redundancy pay, as agreed in your employment contract, it isn't included when calculating when you become eligible for a benefit.

  • How your redundancy pay affects stand-downs

    A stand-down is a period of time before your benefit is paid. Before 23 March 2020 and after 23 November 2020, your redundancy pay will affect how long your stand-down period is.

    If you’ve had a redundancy payment in the past, how it was treated depends on the law at the time:

    • Before 1991, redundancy payments didn't affect stand-downs
    • From March 1991 until November 1992, there was a special redundancy stand-down of up to 26 weeks for people who got redundancy payments.
    • In November 1992, the special redundancy stand-down was removed and a 10 week High Income stand down was introduced. From then until 2007, redundancy payments were included when calculating the length of the stand-down.
    • Since 2007, the stand-down has been either one or 2 weeks. Redundancy payments are included as income when deciding whether someone should have a one-week or two-week stand-down.
    • From 23 March to 23 November 2020, the Government has removed stand-downs as part of its response to COVID-19.
  • Redundancy pay doesn't count as income for benefit payments

    When we calculate the rate of benefit payment you get, redundancy pay and retirement pay don't count as income. This means they don't affect your payment rate. Any interest earned on these payments do count as income.

  • We can check if we treated your redundancy pay correctly

    Redundancy pay is a specific type of payment provided for in some employment contracts.

    When people are made redundant their final pay may include pay in lieu of notice, holiday pay and other payments. Not everyone gets redundancy pay when they are made redundant.

    If you received redundancy pay and think we haven't worked out your benefit start date correctly, you can complete our enquiry form.

    We'll contact you if we need more information, and check whether your redundancy payment was treated correctly.