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What Exactly is Severance Pay and are Teachers Qualified to Receive it?

From Cheryl, published on 30/06/2017 We Love Prof - UK > Tutoring > Advice for Tutors > Redundancy Pay for Teachers

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.

Redundancy pay calculations are simple to make Severance pay?  What is it exactly?  Source Visual Hunt  Images_of_Money

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 a different job
  • ‘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.

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.

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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.

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.

What rights do you have to redundancy pay? How much severance pay are you be entitled to?  Source:  Visual Hunt Gadini

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.

Keeping Hold of your Rights to Redundancy Pay

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 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?

funding early retirement Are you really ready for retirement? Source: David Hilowitz via VisualHunt

Teachers aged 55 and over may choose to take early retirement with a reduced pension, though this must be approved by the employer. To take this option though may have a negative impact on pension entitlement; it is recommended to take professional financial advice about this situation.
Before you take the route of early retirement, you need think very carefully whether it is for you. Early retirement and a life of leisure may sound like the stuff on which dreams are made, but the reality is that it can be a financial struggle. Not to mention the boredom and a sense of isolation from others which often sets in after the honeymoon period is over. This is especially true for people who are used to being busy and important in their working lives, early retirement may leave you climbing the walls, aching to return to the working world.
Whichever way you choose, there is life after redundancy. It may be the push you need to get outside of your comfort zone, to start looking for that promotion to Head of Department in a different school or teaching in a Pupil Referral Unit.
Or it may be the kick-up-the-backside that you need to set up your own business or change direction completely. The severance money you receive will go towards helping supporting you and your loved ones while you make the transition. Use it wisely!
Learn more about how to get out of teaching and how to write a letter of resignation.
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