- How is Severance Pay Calculated?
- Can A Person Challenge Their Redundancy?
- How Much Redundancy Pay Is Tax-Free?
- What Is A P45?
- Is Redundancy Pay For Teachers Taken Away If They Get A New Job?
- Is it Possible to take Early Retirement Instead of Being Made Redundant?
- How Much Notice Should I Be Given By School Before Being Made Redundant?
- Advice For Independent School Employees
- Your Next Move After Redundancy
Severance pay refers to money offered to an employee by an employer to prematurely terminate their contract of work. In the UK, The term is often used interchangeably with the term 'redundancy pay'.
Redundancy is when someone is formally dismissed from their post or job. It usually occurs because employers need to reduce their workforce, normally for financial benefits. Teachers Leaving the National Teaching Service should be aware of their rights.
In the education sector, teachers have numerous reasons to leave their positions. Redundancy usually occurs due to over-staffing; a reduction in school admissions; a poor reputation; new academy sponsors (if the school has academy status) and a re-drafting of the leadership structure.
If you are being made redundant, you may be eligible for certain rights, including:
- redundancy or severance pay
- a notice period (usually 3 months)
- a consultation with your employer
- the option to move into alternative jobs for teachers
- 'reasonable' time off to find a new job
There are certain rules about how people are selected for redundancy. Often the employer will ask for volunteers, although putting yourself forward does not guarantee that you will be chosen to be made redundant. Selection for redundancy should be carried out in a fair way, for example because of your level of experience or capability to do the job. Reasons such as age, gender, race, pregnancy or some form of disability are not acceptable, if someone was given redundancy due to any of these reasons they would have grounds for unfair dismissal.
Some employers may simply adopt the 'last in, first out' policy.
According to UK legislation, as long as an employee has been continuously employed for at least two years with the same employer they are entitled to redundancy or severance pay. The amount that they are entitled to varies though according to length of service and the age of the employee.
How is Severance Pay Calculated?
The Employment Right Act of 1996 provides for a statutory termination payment in the event of redundancy only; there is no statutory severance pay in the event of non-economic dismissals.
Not all teachers will get the same payout for redundancy. The number of weeks pay due depends on the employee’s age and length of service and is calculated as follows:
- 5 week's pay for each year of service where the employee was aged below 22;
- 1 week's pay for each year of service where the employee was aged between 22 to 40
- 5 week's pay for each year of employment where the employee was aged 41 and over.
To calculate redundancy or severance pay, the weekly pay is capped at £489 (or £500 if you are in Northern Ireland), as of 6th April 2017. There are many government websites which can calculate the amount of severance pay you would be entitled to.
For example, a 45 year old teacher, who has been in the teaching profession for 15 years and is on M6 of the Main Pay Scale, would be earning around £36,000. If this teacher was made redundant, the severance pay they would receive would be £8313.00.
The maximum redundancy payment as of 6th April 2017 available to an employee is now £14,670, up previously from £14,370. This is paid in addition to an employee’s notice period.
There was a time when teachers in their fifties found it relatively easy to get early retirement, along with rather pleasing pension enhancements, often worth more than £35,000, but these days are long gone as few, if any, local authorities can afford these payouts now, although an interesting article in the Telegraph recently highlighted some rather large payouts, some for as much as £200,000!
However, the older you are and the more pay rises you accumulate, the better your chances are of being made redundant. An NQT (newly qualified teacher) may be able to do the same job but on a much lower grade so they will certainly be cheaper, thereby saving the local authority quite a lot of money over the year.
Can A Person Challenge Their Redundancy?
It is possible for an employee to challenge a redundancy decision if they feel that there is a valid reason for their employer to not let them go, but they must follow the correct procedure.
Any employee facing redundancy must be informed in writing about the decision and that their role is at risk. The employer should also consult with the employee(s) before making any firm decisions and, where possible, ask for staff to volunteer for redundancy.
Should the employee feel that impending redundancy is an unfair choice then they have the right to appeal and will be given details on how to follow this procedure. If you have been faced with this situation and want to know more about your rights then, first of all, speak to your Human Resources team to enquire about the company's policies and your legal rights as an employee of theirs.
The most likely way an official appeal will go is to a panel of governors at an employment tribunal, so it is really important that the employee is sure that the appeal is necessary and that they've exhausted all other avenues first (like meeting with management to talk over the decision, for example).
It is vital that any claim must be dealt with within three months of the dismissal date, or else the employee may lose any rights they were once entitled to.
How Much Redundancy Pay Is Tax-Free?
So, you have found out how redundancy pay is calculated, but do you know how tax is applied to this lump sum?
There are some special rules that apply to redundancy payments when it comes to tax. For example, there is an exemption from income tax on payments up to £30,000 from one job. If an employee has more than one job, the exemption applies to each one.
You do not have to pay any National Insurance contributions at all on redundancy payments (even if the payment exceeds £30,000), but if the redundancy payment is part of a financial package, some of the funds may be both taxable and subject to NI payments.
As with your normal monthly wages, your employer should deal with the tax and NIC applicable on any redundancy payment or package under the PAYE system. Then, when you are made redundant, your employer will issue you with a P45 form.
What Is A P45?
In the UK and Ireland, a P45 is the reference code of a form titled "Details of employee leaving work". This form is issued by the employer when an employee leaves, no matter who terminated the employment.
The front section, called Part 1, is given by the old employer to HMRC, who then record the pay and tax details on to the ex-employee's taxpayer record. Part 1A is then retained by the employee, while Part 2 retained by the new employer and Part 3 is sent to their tax office. The P45 contains details of earnings and tax paid during the current tax year. Any tax paid in previous years is detailed on the P60 form for that particular year.
You've probably heard the slang term "being given your P45", which means to have your position terminated. Other terms for dismissal include "to be given the sack" and "to be fired" (a line made famous by entrepreneur and The Apprentice star Alan Sugar). The equivalent term in America is "to be given your pink slip".
Discussing P45s can really strike a chord with many workers, because no one wants to be told that they are no longer needed or wanted at their place of work. This is why comedian Simon Brodkin's joke at Theresa May's expense was so controversial and seen as somewhat disrespectful. Brodkin interrupted the Prime Minister's speech at the Conservative Party conference last year to give her a fake P45 slip, as reported by Manchester Evening News.
Is Redundancy Pay For Teachers Taken Away If They Get A New Job?
If you are offered another suitable teaching job or local government job before your redundancy notice period ends and the new job is planned to begin less that four weeks after your prior employment is terminated then your right to severance pay will be lost.
This effectively stops people from leaving one job with a handsome lump sum of money and starting a new one straight away. Redundancy or severance pay is a means of income when you no longer have an employment, it is not a gift at the tax payer's expense.
If however, you are going to be self employed and do tutoring jobs or supply teaching with an agency you are unlikely to lose your right to severance pay. Likewise if you receive a job offer, even within the education sector, after your employment ends or if your new job either does not count as continuous service or starts more than four weeks after your employment from which you were made redundant ends.
Is it Possible to take Early Retirement Instead of Being Made Redundant?
How Much Notice Should I Be Given By School Before Being Made Redundant?
If you have been selected for redundancy, your employer must give you a suitable notice period before your employment ends. The statutory redundancy notice periods are:
- no less than 1 week’s notice if you have been employed between 1 month and 2 years
- 1 week’s notice for each year if employed between 2 and 12 years
- 12 weeks’ notice if employed for 12 years or more
That said, we'd recommend checking your contract because your employer could have set out longer notice periods that they must then abide by.
Advice For Independent School Employees
Anyone who has been employed by an independent school will know that the internal processes are very different from a state school. As such, not many independent schools have formal redundancy procedures, but they need to follow basic principles all the same.
Independent schools must pay statutory redundancy pay (as set out above), yet many reward loyal service by using actual pay, rather than the statutory maximum.
Your Next Move After Redundancy
Being made redundant is nothing to be ashamed of, but that doesn't make it any less embarrassing when you lose your job for one reason or another.
Young to middle-aged teachers may be prepared to jump straight back into applications and interviews however some older teaching staff may not feel inclined to go back to work at another school for their remaining years of work. That said, some teaching professionals with just a handful of years in the industry may take an unexpected redundancy as an opportunity to change career, or at least to change their professional focus.
So, what might teachers move on to after being made redundant from their post?
Most teachers will agree, whether working in primary or secondary education, that teaching is a very demanding job. Not only are the hours long when you take into consideration all of the planning and marking that is expected of you, but it is also quite an emotionally draining job. Teachers must be very thick-skinned and have a wealth of patience if they want to get through the academic year with minimal stress. While not all pupils are physically or verbally abusive to their instructors, it is rare to not come across a challenging pupil or class during your teaching career. This could be because of bad behaviour, or because you are putting in your all trying to help a group of pupils improve.
Teachers can become quite attached to their pupils, so they want nothing more than to see them succeed.
If this is one of the reasons you became a teacher in the first place, but you now want to take a step back from teaching, there are still various options for you.
Qualified teachers with no permanent role at an educational establishment are in a good position to become cover tutors, covering a range of schools within a certain county. The nature of this work is that you could be placed in a school or college for several weeks to cover the long-term absence of a staff member, or you could be telephoned on the day and asked to step in when an expected absence arises.
You will be expected to have your own transport but you will be given a lesson plan to work from, which means that you do not have to do any of the planning.
Alternatively, trained teachers may wish to consider becoming support staff. This enables you to retain close contact with pupils and to help them along their educational journey but once again without the pressure of preparing lessons. If they have the right qualifications, staff could be placed in a classroom with the job of supporting one or perhaps two kids with additional needs.
Last but not least, ex-teachers could put their skills to good use by becoming private tutors or by setting up independent teaching classes via a franchise set-up. Language teachers, for instance, could consider setting up weekly classes held in children's centres dedicated to teaching youngsters how to acquire a new language.
Meanwhile, private tutoring is a popular choice because it enables you to work from home (or visit pupils at their own houses) and to be flexible with your working hours. The downside to this is that most private tutors have to work evenings and weekends to avoid school hours but the positive is that you simply work with what was covered by the student's teacher in class and don't have to plan individual lessons!