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Does a redundancy payment to an employee get posted on the P&L or balance sheet?

Article Written by John Berry on 20th February 2016.

Any redundancy payment that an employer makes to an employee is part of pay and hence is an expense accounted for on the employer's profit and loss account, taken in the month in which the redundancy occurs.

As a cost, a redundancy payment reduces the profits reported from profit and loss account to balance sheet. The payment therefore reduces the net worth of the company as reported on the balance sheet.

Since the redundancy payment is part of pay, it must be treated as such and processed through payroll, making deductions for tax. There are specific situations when redundancy may be tax free


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