Redundancy UK — Your Rights, Notice Pay and How Much You're Owed (2025)
Redundancy is one of the most stressful things that can happen in your working life. But knowing your rights can make a significant difference — both to the amount you receive and to whether the process was handled lawfully. This guide explains everything you need to know: what redundancy legally means, how your statutory pay is calculated, what consultation rights you have, and what to do if you think your redundancy was unfair.
What Is Redundancy? The Legal Definition
Redundancy has a specific legal meaning under the Employment Rights Act 1996. Your dismissal counts as redundancy if it is wholly or mainly due to one of three situations:
- Business closure — the employer has ceased, or intends to cease, to carry on the business in which you were employed
- Workplace closure — the employer has ceased, or intends to cease, to carry on the business at the place where you were employed
- Reduced requirements for employees — the requirements of the business for employees to carry out work of a particular kind have ceased or diminished, or are expected to cease or diminish
This definition matters because if your dismissal does not genuinely fit one of these three categories, it may not be a true redundancy — and you may have a claim for unfair dismissal instead. Employers sometimes use "redundancy" as a convenient label to avoid a disciplinary process or to get rid of employees they simply do not want. This is sometimes called a "sham redundancy" and is unlawful.
Do You Qualify for Statutory Redundancy Pay?
To be entitled to statutory redundancy pay you must meet all of the following criteria:
- You are an employee — not self-employed or a worker. Agency workers may have different rights depending on their contract.
- You have been continuously employed for at least two years by the time your employment ends
- You have been dismissed by reason of redundancy
- You have not unreasonably refused suitable alternative employment offered by the employer
Your qualifying period of two years is calculated from the day you started work to the day your employment ends (the "relevant date" — usually the last day you worked, or the end of your notice period if you were paid in lieu of notice).
How Statutory Redundancy Pay Is Calculated
Statutory redundancy pay (SRP) is calculated using a formula based on three factors: your age, your length of continuous service, and your weekly pay. The formula gives you a number of "weeks' pay" based on each year of service, adjusted for age:
| Age During Each Year of Service | Weeks' Pay Per Year |
|---|---|
| Under 22 | Half a week's pay |
| 22–40 | One week's pay |
| 41 and over | One and a half weeks' pay |
You can count a maximum of 20 years of continuous service, and the weekly pay used in the calculation is capped — at £643 per week from 6 April 2025. The maximum statutory redundancy payment is therefore £19,290 (20 years × 1.5 × £643). These caps are reviewed each April.
Example Calculation
Sarah is 47 years old and has worked for the same employer for 12 years, earning £800 per week. Her weekly pay is capped at £643. She has three years of service while aged 41 or over (ages 44–46), earning 1.5 weeks each = 4.5 weeks. She has nine years of service while aged 22–40, earning 1 week each = 9 weeks. Total: 13.5 weeks × £643 = £8,680.50.
Enhanced redundancy pay — anything above the statutory amount — may be offered by your employer under your contract or as part of a settlement agreement. This is subject to negotiation and is typically free of income tax up to a total termination payment of £30,000.
Notice Pay and Payment in Lieu
In addition to redundancy pay, you are entitled to your full notice period — either worked or paid. Your statutory minimum notice entitlement under the Employment Rights Act 1996 is:
- One week's notice for each complete year of service, up to a maximum of 12 weeks
- At least one week if you have been employed for one month or more
Your contract may give you a longer notice period than the statutory minimum, and you are entitled to the contractual period if it is longer. If you are placed on "garden leave" — paid to stay away from the workplace during your notice — this counts as working your notice. If the employer pays you in lieu of notice (PILON), this terminates your employment immediately. Since April 2018, PILON is always taxable as income, regardless of whether your contract contains a PILON clause.
Holiday Pay on Redundancy
When your employment ends you are entitled to be paid for any unused accrued holiday. This is calculated at your normal rate of pay, not just your basic salary — it should include regular overtime, commission, and other variable pay if these are normally part of your remuneration (following a series of Employment Appeal Tribunal and Court of Justice of the EU decisions). If you have taken more holiday than you have accrued, your employer may deduct the overpayment from your final pay, but only if your contract explicitly permits this.
The Consultation Process — What Your Employer Must Do
A redundancy process that does not follow the proper consultation requirements may be unfair, regardless of whether there is a genuine redundancy situation.
Individual Consultation
Regardless of the number of redundancies, your employer must carry out a meaningful individual consultation with you before making you redundant. This means:
- Giving you advance warning that redundancy is being considered
- Explaining the reasons for the redundancy
- Explaining the selection criteria if more than one person is at risk
- Considering any representations you make
- Considering whether there are any suitable alternative vacancies
A consultation that consists of a single meeting followed immediately by a redundancy notice is almost certainly inadequate and may render the dismissal unfair.
Collective Consultation — 20 or More Redundancies
If your employer proposes to dismiss 20 or more employees at the same establishment within a period of 90 days or less, additional collective consultation obligations apply under the Trade Union and Labour Relations (Consolidation) Act 1992:
- 20–99 proposed redundancies — minimum consultation period of 30 days before the first dismissal takes effect
- 100 or more proposed redundancies — minimum consultation period of 45 days
The employer must also notify the Secretary of State (HMRC's Redundancy Payments Service) using form HR1 at least 30 or 45 days in advance. Failure to do so is a criminal offence. Employee representatives (union reps or elected employee reps) must be given specific information in writing and genuinely consulted about ways to avoid or reduce the redundancies.
Selection Criteria — Avoiding Unfair Selection
If you are one of a group of employees doing similar work and the employer is selecting some but not all for redundancy, the selection criteria must be objective, fair, and consistently applied. Common selection criteria include:
- Skills, qualifications, and experience
- Performance and attendance records
- Length of service (LIFO — Last In First Out — is still used but must not be the sole criterion, as it may indirectly discriminate)
- Disciplinary record
Criteria that are indirectly discriminatory — such as selecting part-time workers first, which disproportionately affects women — may be unlawful under the Equality Act 2010. You have the right to see the scores applied to you, and to challenge them if you believe they are inaccurate or unfairly applied.
Suitable Alternative Employment
Before making you redundant, your employer must consider whether there are any suitable alternative vacancies within the business or any associated employer. If a suitable vacancy exists and the employer fails to offer it to you, the redundancy may be unfair. If you are offered a suitable alternative and unreasonably refuse it, you lose your right to statutory redundancy pay.
You have the right to a four-week trial period in any alternative role. If you accept the alternative and it does not work out during the trial period, you can still claim your redundancy pay, provided you have a genuine reason for concluding the role is not suitable for you.
Was Your Redundancy Unfair?
Even where a genuine redundancy situation exists, the dismissal can still be unfair if the employer did not follow a fair process. An Employment Tribunal will ask two questions:
- Was there a genuine redundancy situation?
- Did the employer act reasonably in all the circumstances — including consultation, selection, and consideration of alternatives?
If either answer is no, you may have a claim for unfair dismissal. You need two years' continuous service to bring an ordinary unfair dismissal claim. If your claim succeeds, you may receive both a basic award (calculated like redundancy pay) and a compensatory award for financial loss, up to a maximum of £115,115 or 52 weeks' gross pay.
Redundancy and Tax
Statutory redundancy pay is free of income tax and National Insurance, as is any enhanced payment, up to a combined total of £30,000 in termination payments from the same employer. Amounts above £30,000 are taxable as income in the year of receipt. Notice pay (whether worked or paid in lieu) and holiday pay are always taxable as normal income. If you receive shares or other benefits as part of your redundancy package, specialist tax advice may be needed.
Step-by-Step: What to Do When You're Made Redundant
- Get everything in writing — ask your employer to confirm the redundancy, the selection criteria applied to you, the date your employment ends, and the payments you will receive.
- Calculate what you're owed — use a redundancy pay calculator and check your contract for any enhanced entitlements.
- Raise a grievance if the process was unfair — if consultation was inadequate or selection criteria were applied wrongly, raise a formal grievance before your employment ends if possible.
- Consider a settlement agreement — if your employer offers enhanced pay in exchange for signing a settlement agreement, seek independent legal advice (your employer should pay for this) before signing.
- Claim at the Employment Tribunal if necessary — the time limit is three months minus one day from your dismissal date. Contact ACAS first for early conciliation.
- Claim benefits if needed — register with your local Jobcentre Plus immediately. You may be entitled to new-style JSA or Universal Credit while you look for work.