What does it cost to fire somebody in the UK?Posted: 5 May, 2014
Take-home message: firing people is very cheap.
It is claimed now and again that making it easier to fire people makes it easier to hire them. The logic is that employers do not hire staff because they are worried about the cost of laying them off if business does not go as well as they expect. So an employer’s reasoning is that they would like to expand their business by hiring more people, but the possible costs associated with `making them redundant’ (actually, `dismissing by reason of redundancy’) put them off.
It is easy enough to find out what it costs to dismiss someone by reason of redundancy in the UK. If someone has worked for an employer for less than two years, they have no right to a redundancy payment. After two years service, they have a right to a redundancy payment of one week’s pay per full year worked which is halved for each year worked under age 22. That `week’s pay’ is capped at £464.
So if business has not gone as well as expected and you have to fire someone less than two years after you hired them, it costs nothing.
If business has gone well for a bit, and you have to fire minimum wage staff who have worked for just over two years, it costs £495.20 for the adults, and £201.20 for the under twenties.
In other words, you can fire someone at no cost whatsoever in the first two years. After that, it can cost the same as filling the tank of a big car twice.