Redundancy pay and age discrimination

It is not age discrimination to provide an enhanced redundancy payment scheme, as long as it mirrors the statutory scheme for redundancy pay.

A redundancy scheme will not be age discriminatory if it amends the statutory scheme in any of the following ways:

• by exceeding (or removing altogether) the statutory cap on a week’s pay;

• by multiplying the amount for each age band; or

• by multiplying the total amount by a figure of more than one.

(Paragraph 13: Schedule 9 EA 10)

An employer is free to devise its own redundancy scheme not based on the statutory scheme, but the employer must be able to justify it objectively as a proportionate means of achieving a legitimate aim if challenged as age discriminatory. There have been several important recent rulings, in particular Lockwood v Department of Work and Pensions [2013] EWCA Civ 1195 and Heron v Sefton Metropolitan Borough Council UKEAT/0566/12/SMA.

A policy that pays the same to everyone, for example, a scheme paying a month’s pay per year of service to every employee regardless of age, will not need justification, as there will be no age discrimination.