UK Redundancy Rights: Know What You're Owed
Redundancy in the UK is governed by the Employment Rights Act 1996. Learn your statutory entitlements, settlement agreement rights, and how to negotiate for enhanced packages.
Analyze Your Severance NowUK Redundancy at a Glance (April 2026)
Weekly Pay Cap
Maximum weekly earnings counted toward redundancy (increased from £719 in April 2026)
Maximum Statutory Payout
Capped at 20 years of service; increased from £21,570 in April 2026
Tax-Free Threshold
First £30,000 is tax-free; anything above is subject to income tax
Statutory Redundancy Calculator
Enter your details to calculate your statutory redundancy entitlement:
How Statutory Redundancy is Calculated
Redundancy pay is based on three factors: your age, years of service, and weekly pay (capped at £751):
Under 22 years old
weeks' pay per year of service
Age 22-40
weeks' pay per year of service
Age 41+
weeks' pay per year of service
Example: A 45-year-old with 10 years of service earning £700/week: 10 years × 1.5 weeks = 15 weeks × £700 = £10,500 statutory redundancy (no cap applies here).
Statutory vs. Settlement Agreement
Your statutory redundancy is just the starting point. Here's where settlement agreements can dramatically increase your payout:
Statutory Minimum (Legal Floor)
- ✓Statutory redundancy formula (age × years × weekly pay)
- ✓Notice period (1 week to 12 weeks)
- ✓Accrued holiday pay
- ✗Enhanced severance
- ✗Legal fees covered
- ✗Extended notice/salary continuation
Example: £15,000 statutory maximum + notice period
Settlement Agreement (Negotiated)
- ✓Statutory redundancy (minimum)
- ✓Enhanced severance (1-6 months salary)
- ✓Legal fees (£500-£2,000 tax-free)
- ✓Extended notice/salary continuation
- ✓Pension contributions continued
- ✓Outplacement services (£500-£2,000 tax-free)
Example: £15,000 statutory + £30,000 enhanced + £2,000 legal + £2,000 outplacement = £49,000 total
The difference is huge. Employers expect you to negotiate. Getting independent legal advice typically pays for itself 10x over through improved settlement terms.
What Goes Into a Settlement Agreement?
Settlement agreements bundle multiple components beyond base severance:
Base Severance Multiplier
Enhanced redundancy payment, often 1-6 months of salary above statutory minimum. Negotiated based on role, tenure, market conditions, and company resources.
Typical: 2-6 weeks of salary (average)
Accrued Holiday Pay
Statutory requirement: payment for all accrued but unused holiday entitlement. Typically 20-25 days per year depending on contract.
Typical: 100% of accrued holiday (legal minimum)
Bonuses & Variable Pay
May include unpaid bonuses, commission, or performance-related pay accrued during employment. Often negotiated for full pro-rata payment.
Typical: Pro-rata or negotiated % of annual bonus
Pension Contributions
Employer may continue pension contributions through the notice period or pay additional employer contributions into your retirement pot.
Typical: 2-4 weeks of employer contributions
Extended Notice Period
Payment in lieu of full notice period. Settlement agreements often include salary continuation for extended notice (e.g., 12-26 weeks).
Typical: 4-26 weeks of salary continuation
Outplacement Services
Career coaching, CV writing, interview prep. Tax-free up to £750 value. Can provide real value alongside cash settlement.
Typical: £500-£2,000 value (tax-free)
References & Recommendation
Contractual commitment that employer will provide a positive reference or specific agreed language. Critical for future employment.
Typical: Agreed reference (non-financial)
Legal Fees
Employer reimbursement for solicitor advice on the settlement agreement. Typically £500-£2,000 depending on complexity. Part of settlement value.
Typical: £500-£2,000 (tax-free)
Statutory Notice Periods
Your employer must provide notice based on your length of service:
| Length of Service | Notice Required |
|---|---|
| Less than 1 month employment | No notice required |
| 1 month to 2 years | 1 week notice (by law) |
| 2-12 years | 1 week per year of service |
| 12+ years | 12 weeks notice (maximum) |
Note: These are statutory minimums. Your contract may specify longer notice periods. Settlement agreements often replace statutory notice with "payment in lieu" or extended salary continuation.
Your Key Redundancy Rights
These protections ensure fair treatment during redundancy:
Statutory Redundancy is Your Legal Minimum
If you have 2+ years continuous employment and meet the age brackets, you are legally entitled to statutory redundancy. This is not negotiable with the employer—it's your floor. Settlement agreements typically enhance this significantly.
Right to Consultation Before Redundancy Selection
If 20+ employees are made redundant within 90 days, your employer MUST consult collectively. You have the right to know the selection criteria, be considered for alternative roles, and have input on redundancy terms. Failure to consult is unlawful.
Right to Time Off to Look for Work
If you have 2+ years tenure and are selected for redundancy, you have the statutory right to paid time off to search for new employment or attend training. This is typically 40 hours per week until you find work or notice expires.
Right to Suitable Alternative Employment
Employers must offer suitable alternative roles before redundancy. If you refuse unreasonable alternative work, you may lose redundancy rights. But you can refuse work that is substantially different in pay, location, or terms without penalty.
Unfair Dismissal Claims for Selection Based on Protected Characteristics
If you are selected for redundancy because of your age, race, gender, disability, religion, sexual orientation, or other protected characteristics, you can claim unfair dismissal. This applies regardless of tenure (even 1 day of employment).
Whistleblower Protection Even After Redundancy
If you are selected for redundancy because you raised a health & safety concern, reported discrimination, or disclosed wrongdoing, your dismissal is automatically unfair. You can claim unlimited compensation. These claims survive even after accepting a settlement agreement.
Red Flags to Watch For
Be cautious if you encounter these situations during redundancy:
Employer offers only statutory minimum when settlement agreements with 3-6 months salary are industry standard for your role. This signals they have budget but are testing your knowledge.
Pressure to sign settlement agreement within 24-48 hours, or threat that the offer expires. You have the right to independent legal advice; employers cannot rush you. Any legitimate offer will still be valid after consultation with a solicitor.
Settlement agreement includes a broad release of discrimination, whistleblower, or unfair dismissal claims without proper legal consideration. Never waive claims without understanding what you're giving up.
Non-compete or restrictive covenant clauses in the settlement agreement that restrict where you can work or what clients you can serve. These are often unenforceable and reduce the real value of your package. Challenge them.
Employer refuses to allow you to consult a solicitor before signing, or refuses to pay legal fees. Settlement agreements must be supported by independent advice; if they won't cover costs, that signals weakness in their position.
Being told your redundancy is "not about performance" yet you're selected while similar colleagues are retained without explanation. Lack of transparent selection criteria suggests potential discrimination.
Frequently Asked Questions
How much statutory redundancy am I entitled to?
Statutory redundancy is calculated by your age, years of service, and weekly pay (capped at £751 as of April 2026). For each year of service: Under 22 = 0.5 weeks pay; Age 22-40 = 1 week pay; Age 41+ = 1.5 weeks pay. Maximum 20 years counted, maximum payout £22,530. You must have 2+ years continuous employment to qualify. Use the calculator above with your age, years of service, and weekly pay to estimate your entitlement.
What is the difference between statutory redundancy and a settlement agreement?
Statutory redundancy is the legal minimum you are entitled to under the Employment Rights Act 1996. A settlement agreement is a negotiated package between you and your employer that typically includes statutory redundancy PLUS enhanced compensation, extended notice, legal fees, and other benefits. Settlement agreements require your agreement and release of certain legal claims in exchange for typically 2-6 months additional salary above statutory. This is where the real money is negotiated.
Is the first severance offer I receive the only one available?
No. Employers typically open with a low offer to test your knowledge. If you know your legal entitlements, you have negotiating leverage. Consult an employment solicitor (many offer free initial consultations); they can often increase your package by 50-200% through negotiation. The cost of legal advice is typically offset by the increased settlement value. Never accept the first offer without understanding your rights.
How is redundancy pay taxed?
The first £30,000 of redundancy pay is tax-free. Anything above £30,000 is subject to income tax and National Insurance. Statutory redundancy and settlement agreement payments above £30,000 will have tax deducted. Ensure your employer correctly calculates this; overpayment of tax can happen. Keep records for your tax return.
What happens to my pension when I am made redundant?
Your pension rights are protected. The employer must allow you to continue making contributions if you wish. They may also offer to increase employer contributions during the notice period. In settlement agreements, verify the pension treatment: will they continue matching contributions? Will they pay a lump sum into your pension pot? These can be significant components of the package worth thousands of pounds.
Can my employer force me to sign a settlement agreement?
No. A settlement agreement requires your informed consent. However, if you refuse to sign and your employer proceeds with statutory redundancy only, you cannot later claim the settlement offer was unfair. This is why getting independent legal advice is critical—a solicitor can advise whether the offer is reasonable and help negotiate. If the employer will not allow consultation with a solicitor, that is a red flag about the offer's fairness.
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Start the AnalyzerDisclaimer: SeveranceIQ is an educational tool providing general information about redundancy rights. This is not legal advice. Employment law is complex and varies by jurisdiction. Every situation is different. Before signing any settlement agreement or making legal decisions, consult an independent employment solicitor or lawyer. The information here is current as of April 2026 but may change as law evolves.