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Redundancy ‘Severance Pay’ under NEACI contract

Entitlement to Statutory Redundancy payments, embedded into the Employment Rights Act 1996 – Section 135 generally requires two years of qualifying employment service.

NAECI is unique in providing consideration for employees who face changes to their working arrangements within the first two years of employment including redundancy. The NAECI 16.5 (a) Redundancy Payments clause states that “Upon termination of employment because of redundancy or at the end of a fixed-term contract a contractual severance payment will be made for each complete week of continuous employment”.

It makes allowable, a payment to recognise the economic problems facing workers who have been made redundant that do not have the qualifying service for statutory redundancy pay.

The application of this NAECI section is normally automatic when individuals or groups of workers are no longer required typically towards the end of an engineering project. They are declared redundant and receive their final remuneration including Severance Pay.

Employers should remember that Severance Pay may also apply when transferring employees to another employer.

Many projects are mindful of optimising the use of experienced tradespersons, particularly towards the end of projects when some contractors complete their commercial commitment and find that other contractors may well make good use of the departing labour.

New employers may offer employment ‘with continuity of service’ to recruits with the added responsibility for future severance payments. If they do not make such an offer, the responsibility remains with the original employer.

It is important therefore that the entitlement to Severance Pay is discussed and agreed upon between the parties to determine responsibility to avoid any issues including unwanted expenditure. Should there be a dispute arising at any stage, the NEACI 14 Procedural Grievances clause applies.