If you dismiss someone with a payment in lieu of notice, to calculate his or her length of service for the purposes of statutory redundancy pay, you should add on the minimum statutory notice period to the employee’s service as at the date on which the employment ends.
An employee’s length of service for redundancy pay purposes should be calculated as at the “relevant date” in accordance with s.145 of the Employment Rights Act 1996. Where an employee has been dismissed without the statutory minimum notice to which he or she is entitled, including where a payment is made in lieu of notice, s.145(5) states that the relevant date is the date on which the minimum notice would have expired had it been given.
So if an employee would have reached an anniversary increasing his or her length of service during the statutory minimum notice period, had he or she not been dismissed without notice, the extra year should be included in the calculation of his or her redundancy payment.
For example, an employee with six years and 11 months’ service is entitled to six weeks’ statutory minimum notice (under s.86 of the Employment Rights Act 1996). If the employee is dismissed with a payment in lieu of notice, the redundancy payment will be calculated based on seven years of service because the six weeks’ notice required under s.86 would have taken him or her past the anniversary date. Their notice period would remain at 6 weeks’ though.