Redundancy Rights : calculate what you are owed

Redundancy occurs when an employer dismisses an employee because:

• The business is closing (wholly or at a particular location)
• The workplace is relocating and it is not reasonable to expect the employee to move
• The employer needs fewer employees to do a particular kind of work

Under the Employment Rights Act 1996, Section 139, redundancy is a specific legal concept. It is about the job disappearing, not about the person being inadequate. If your employer replaces you with someone else doing the same role, it is not a genuine redundancy.

To qualify for statutory redundancy pay, you must:

• Be an employee (not a worker or self-employed)
• Have at least 2 years of continuous service with the employer
• Have been genuinely made redundant (or laid off/put on short time)

You can find further details on GOV.UK's redundancy rights page.

Employees Who Are Not Entitled

• Employees with less than 2 years' continuous service
• Agency workers (they are usually workers, not employees)
• Members of the armed forces
• Share fishermen/women
• Domestic servants who are close family members of the employer
• Crown servants and parliamentary staff (separate provisions apply)

Statutory redundancy pay is calculated based on your age, length of service, and weekly pay (subject to a cap).

The Formula

Key Limits (2025/26)

Calculation Example

Sarah, aged 45, has worked for her employer for 12 years. Her weekly pay is £800.

Since the weekly pay cap is £700, we use £700 for the calculation.

• Years aged 41-45: 4 years x 1.5 weeks = 6 weeks
• Years aged 22-40: 8 years x 1 weeks = 8 weeks
• Total: 14 weeks' pay
• 14 x £700 = £9,800 statutory redundancy pay

Note: Many employers offer enhanced redundancy packages above the statutory minimum. Check your contract, staff handbook, or any collective agreement.

Tax on Redundancy Pay

The first £30,000 of a redundancy payment (statutory or enhanced) is tax-free. Amounts above £30,000 are subject to income tax and potentially employer National Insurance contributions.

In addition to redundancy pay, you are entitled to a notice period (or pay in lieu of notice):

Statutory Notice

Your contract may provide for a longer notice period, you are entitled to whichever is greater.

Pay During Notice

During your notice period, you should receive your normal pay, including:

• Basic salary
• Regular overtime (if applicable)
• Commission or bonuses that would normally be earned
• Any contractual benefits (car allowance, health insurance, etc.)

If your employer asks you to leave immediately and not work your notice, they must pay you in lieu of notice (PILON). Check your contract, some have a specific PILON clause.

Individual Consultation

Regardless of the number of redundancies, the employer must conduct meaningful individual consultation with each affected employee. This should include:

1. Warning, informing you that redundancy is being considered
2. Explanation, the business reasons for the redundancy
3. Selection criteria, how employees will be selected (must be objective and fair)
4. Consultation meetings, genuine discussion about alternatives, including redeployment
5. Right to be accompanied, by a trade union representative or colleague
6. Consideration of alternatives, exploring redeployment, reduced hours, or voluntary redundancy

ACAS provides detailed guidance on your rights during redundancy.

Collective Consultation (20 or More Redundancies)

When an employer proposes to make 20 or more employees redundant at one establishment within a 90-day period, additional requirements apply under the Trade Union and Labour Relations (Consolidation) Act 1992, Section 188:

The employer must also:

• Consult with appropriate representatives (trade union reps or elected employee reps)
• Notify the Redundancy Payments Service using form HR1
• Provide specified information in writing (reasons, numbers affected, selection criteria, proposed method of calculating payments)

Failure to consult collectively can result in a protective award of up to 90 days' pay per affected employee.

The criteria used to select employees for redundancy must be objective, fair, and consistently applied. Common (and generally acceptable) criteria include:

• Skills, qualifications, and experience
• Attendance record (excluding pregnancy-related or disability-related absence)
• Disciplinary record
• Performance appraisal scores
• Length of service (though this alone may be age-discriminatory)

Unacceptable criteria include:

• Pregnancy or maternity leave
• Trade union membership or activities
• Part-time or fixed-term status
• Making a whistleblowing disclosure
• Asserting statutory rights (e.g., minimum wage, working time)
• Any protected characteristic under the Equality Act 2010

Your employer has a duty to consider whether there is suitable alternative employment available for you within the organisation (including associated companies).

If you are offered a suitable alternative role and unreasonably refuse it, you may lose your right to statutory redundancy pay.

However, you have a 4-week trial period in any new role. If during this trial you (or your employer) decide the role is not suitable, you can still claim redundancy pay based on your original role.

What Makes an Alternative Role "Suitable"?

The tribunal will consider:

• Similarity of duties and responsibilities
• Location and travelling distance
• Pay and benefits
• Working hours
• Status and seniority
• Your personal circumstances (e.g., caring responsibilities, health)

If you are being made redundant and have 2 or more years' service, you have a statutory right to reasonable time off during working hours to look for new employment or arrange training. Your employer must pay you at your normal rate for this time (up to 40% of a week's pay).

You may have grounds to challenge your redundancy if:

• There was no genuine redundancy situation (the role still exists, just filled by someone else)
• The selection criteria were unfair or discriminatory
• The consultation process was inadequate (no meaningful consultation)
• The employer failed to consider suitable alternative employment
• You were selected for a prohibited reason (pregnancy, whistleblowing, etc.)

Steps to Challenge

1. Raise a grievance with your employer, do this before or shortly after your dismissal
2. Contact ACAS for Early Conciliation (mandatory before a tribunal claim)
3. File a claim at the Employment Tribunal within 3 months minus 1 day of your effective date of termination (6 months for a statutory redundancy pay claim). See our full guide on filing an Employment Tribunal claim
4. Seek legal advice, employment solicitors often offer free initial consultations for redundancy cases

Your final pay packet should include:

Check your final payslip carefully against this list.

Employers often offer a settlement agreement (formerly called a compromise agreement) as part of the redundancy process. This is a legally binding contract where you agree to waive your right to bring certain tribunal claims in exchange for a financial package.

Key points:

• You must receive independent legal advice before signing (your employer usually contributes towards this cost)
• The agreement must be in writing
• It can cover a wider range of payments than statutory redundancy alone
• Once signed, you generally cannot bring an Employment Tribunal claim
• Do not feel pressured to sign quickly, take time to consider the offer and take advice

When facing redundancy, having accurate records of your employment, hours worked, and pay received is invaluable (whether for calculating what you are owed, challenging an unfair process, or negotiating a better settlement. PayeMesHeures gives you a complete picture of your working history, making it easy to verify your final pay, calculate your redundancy entitlement, and build evidence if you need to take your case further. Preparation is your best defence) start tracking today.

How much statutory redundancy pay will I get?

Statutory redundancy pay depends on your age, length of service, and weekly pay (capped at £700 in 2025/26). Use the formula above or check the calculator on GOV.UK. The maximum statutory payout is £21,000, but many employers offer enhanced packages.

Can I be made redundant while on maternity leave?

Redundancy during maternity leave is not automatically unlawful, but employees on maternity leave have a priority right to be offered suitable alternative vacancies. If you are selected for redundancy because of your pregnancy or maternity leave, that is automatically unfair dismissal under the Employment Rights Act 1996. Seek advice from ACAS immediately.

What is the difference between statutory and contractual redundancy pay?

Statutory redundancy pay is the legal minimum set by the Employment Rights Act 1996. Contractual (enhanced) redundancy pay is anything your employer offers above this minimum, usually set out in your contract or staff handbook. The first £30,000 of either type is tax-free.

My employer says the role is redundant but they have advertised the same job : what can I do?

If your employer replaces you with someone else doing substantially the same role, it is unlikely to be a genuine redundancy. This could give you grounds for an unfair dismissal claim. Gather evidence (the job advert, your job description) and contact ACAS to start Early Conciliation within 3 months minus 1 day of your termination date.