Redundancy Compensation in Gibraltar

26/03/2024 Mark W. Isola KC, Nicholas Isola

ISOLAS Partner Mark Isola KC and Senior Associate Nick Isola, experts in employment law, provide a comprehensive analysis of statutory redundancy compensation in Gibraltar highlighting both the similarities and key differences to England and Wales.

In the lead-up to the last General Election on 12th October 2023, the Gibraltar Chronicle published an article on the election wish list of Unite the Union (“Unite”), which Unite said was to benefit members, workers and employers alike in delivering a better-paid, supported, motivated and trained workforce and which would ultimately aid the economic growth of Gibraltar.

Whilst there may be wide support, and even cross-party political support, for certain initiatives (in parts or in full) in the wish list such as amending the laws on maternity and paternity leave which many in the community will consider to be outdated or inadequate, other proposals may be viewed with real concern by employers, particularly businesses in the private sector, that are still recovering from the dual effects of the Covid-19 pandemic, and the continuing uncertainties of the post-Brexit era in the absence of any treaty with the European Union.

One proposal on Unite’s wish list is to increase the statutory redundancy payment (“SRP”) ceiling from 52 weeks’ pay to 78 weeks’ pay, which employers would naturally view as materially increasing their costs and negative to economic growth in Gibraltar.

It is important to highlight the protections and advantages that Gibraltar’s employees already enjoy on redundancy which provide them with greater statutory redundancy packages than their counterparts in England & Wales, and the cost of such redundancies, always an important factor when outside businesses consider the competitiveness, and attraction, of setting up in Gibraltar rather than competitor jurisdictions. There are material differences between Gibraltar and England & Wales when considering entitlements to SRP and which are already far more favourable to employees in Gibraltar than their counterparts in England & Wales for the following reasons:

Eligibility for SRP 

1. The qualifying period to be entitled to claim SRP for eligible employees in Gibraltar is only 1 year’s continuous employment whereas in England & Wales it is 2 years’ continuous employment.

Calculation of SRP

Length of service and age

2. The amount received in SRP depends on length of service and, in Gibraltar, an employee is entitled to 2 weeks’ pay for each of the first 5 years of completed years of service; 3 weeks’ pay for each of the next 5 years of completed years of service; 4 weeks’ pay for each additional completed year of service thereafter; and, where an employee is aged 41 years and over, 2 weeks’ additional pay for each completed year of service after the age of 40. In England & Wales, an employee receives 0.5 week’s pay for each completed year of service under the age of 22, 1 week’s pay for each completed year of service aged 22 or over, and under 41, and 1.5 week’s pay for each completed year of service aged 41 or older.

A week’s pay

3. The maximum weekly amount of pay in England & Wales for the purposes of calculating SRP is capped by statute, at £643 per week even if the employee enjoys a greater weekly wage. No such maximum statutory weekly cap applies in Gibraltar.


4. The maximum length of service considered in England & Wales is 20 years, and as a result of such capping an employee in England & Wales can only be paid up to a maximum SRP of £19,290 based on the capped weekly wage. In Gibraltar, there is a statutory cap of 52 weeks’ pay, but as previously stated, no cap on the weekly pay that applies, so an employee earning, by way of example, £90,000 annually, would receive the full £90,000 if they were so entitled to the maximum capped SRP, far in excess of the £19,290 cap applicable in England & Wales.

5. The whole of the SRP is normally exempted from income tax in Gibraltar unlike in England & Wales where it is subject to a cap of £30,000 tax exemption. The Income Tax (Allowances, Deductions and Exemptions) Rules 1992 (“Rules”) of Gibraltar expressly provides that certain classes of income are exempt from tax with, in particular, Rule 3(9) applying to an amount paid on redundancy where the Commissioner of Income Tax considers the amount payable to be “appropriate, having regard to, but not limited to, the employee’s length of service with the employer who made them redundant and their rate of pay”. This is in addition to the separate exemption that exists under Rule 3(8) of the Rules for unfair dismissal where, for example, the employer makes an ex-gratia award as part of the redundancy process. As a consequence,
and continuing with the example in paragraph 4 above, that employee would receive the £90,000 tax free upon being made redundant in Gibraltar whereas the same employee in England & Wales would only receive tax free the first £30,000 on termination of their contract of employment, and the balance would be subject to deductions for income tax.

6. In England & Wales an employee would not be entitled to SRP if (a) the employer offers to keep the employee on; and (b) the employer offers suitable alternative employment which the employee refuses without good reason to accept. No such similar caveats exist in Gibraltar to preclude payment of SRP where an employer can provide and offer the employee suitable alternative employment to avoid the redundancy in the first place.

Similarities between Gibraltar and England & Wales

There are additional protections that are common to both jurisdictions in a redundancy situation including:-

1. In a contested redundancy, a claim for unfair dismissal, and a protective award where the provisions relating to collective redundancies are not complied with and which require an employer that is proposing to dismiss as redundant a minimum of five (minimum of 20 employees in England & Wales) or more employees within a period of 90 days or less to comply with various consultation provisions, including providing information and beginning consultations at , in Gibraltar, the earliest opportunity or at least 60 days (at least 30 days for 20 to 99 redundancies, and at least 45 days for 100 or more redundancies in England & Wales) before the first of those dismissals take effect with the giving of the minimum notice of termination.

2. The employee is also entitled to his notice period in addition to any SRP with statute in Gibraltar prescribing minimum periods of notice between one to three months’ depending on the length of service of the employee, and leaving aside any greater notice that may be agreed under the contract of employment.


There is of course an important economic balance that needs to be struck between businesses and the protection of employees in Gibraltar. Gibraltar already has significant employee protections in the area of redundancy, with the unemployment figure at the end of the second quarter of 2023 recording a new record low of only 26 Gibraltarians being registered as unemployed according to the GSLP Liberal Manifesto 2023 before their recently re-election as His Majesty’s Government of Gibraltar. It is therefore difficult to understand how the increase proposed by Unite will actually aid the economic growth in Gibraltar and not impose a disproportionate and additional burden on the private sector in Gibraltar, when eligibility and entitlements to statutory redundancy compensation, including their tax treatment, are already materially better and more favourable in Gibraltar than in England & Wales. However, and to avoid effecting redundancies in the first place by providing greater flexibility to employers when faced with the difficult decision of cutting costs in the workplace, a more balanced change to employment law would be to introduce a statutory provision similar to that in England and Wales to allow employers to offer suitable alternative employment to employees to avoid the necessity of effecting job losses in the first place, with the hardship and difficulties that entails for all concerned.


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