Nobody wants to think about redundancy. But if it happens to you — and in the current economy, it’s happening to a lot of people — knowing your rights could be worth thousands of pounds. UK employment law actually provides pretty solid protections, but most people don’t realise what they’re entitled to until they’re sat in an HR meeting trying to process what they’ve just been told.
What Actually Counts as Redundancy?
Redundancy is when your employer needs fewer people to do a particular type of work. It is not redundancy if your role still exists and they just want to replace you with someone cheaper or more skilled — that’s dismissal, and completely different rules apply. Genuine redundancy reasons include: the business is closing, your workplace is closing, or there’s simply less need for employees doing your type of work.
Statutory Redundancy Pay
You qualify if you’ve been continuously employed for 2+ years. The calculation is:
- Half a week’s pay for each full year you worked while under 22
- One week’s pay for each full year while aged 22–40
- 1.5 weeks’ pay for each full year while aged 41 or over
Weekly pay is capped at £700 (2025/26), and the maximum service counted is 20 years. That gives a maximum statutory redundancy payment of £21,000. And here’s the good bit: it’s completely tax-free.
Consultation Requirements
Your employer can’t just hand you a box and walk you to the door. They must consult. What that looks like depends on scale:
- Fewer than 20 redundancies: Individual consultation, no minimum period set by law (but it must be “meaningful” — a five-minute chat doesn’t cut it)
- 20–99 redundancies: Collective consultation starting at least 30 days before the first dismissal
- 100+ redundancies: Collective consultation at least 45 days before, plus the employer must notify the Secretary of State
During consultation, your employer must genuinely discuss ways to avoid redundancies, reduce numbers, and soften the blow. A rubber-stamping exercise where the decision is already made? That’s not lawful consultation.
Notice Periods
On top of redundancy pay, you get your contractual or statutory notice period (whichever is longer). Statutory minimums are:
- 1 week for 1 month to 2 years of service
- 1 week per year for 2–12 years of service
- 12 weeks for 12+ years
Your employer can pay you in lieu of notice (PILON) instead of having you work it. Notice pay is taxable as normal earnings — unlike redundancy pay, which is tax-free.
Selection Criteria and Unfair Dismissal
Your employer must use fair, objective selection criteria. Typical ones include length of service, attendance, skills, disciplinary record, and performance ratings. What’s not acceptable: picking someone because of pregnancy, age, disability, trade union membership, or because they raised a health and safety concern.
If you believe the selection was unfair, you may have a claim for unfair dismissal at an employment tribunal. You must act within 3 months less 1 day of your dismissal date, and you need to contact ACAS for early conciliation first.
Settlement Agreements
A lot of employers offer a settlement agreement (used to be called a “compromise agreement”) alongside or instead of statutory redundancy. It’s a legally binding deal where you agree not to bring tribunal claims in exchange for a better payout. Key things to know:
- You must get independent legal advice for it to be valid
- The employer usually pays £350–£500 towards your legal fees
- The first £30,000 of the settlement is usually tax-free
- You should get at least 10 calendar days to consider (per the ACAS Code of Practice)
One thing most guides won’t tell you: the first offer is almost never the best offer. If the employer has offered a settlement, they’ve already decided to pay — negotiation is expected.
What to Do Right Now
If you’ve been told you’re at risk: don’t sign anything on the spot. Check your contract for enhanced redundancy terms (lots of companies pay more than the statutory minimum). Calculate your entitlement. Attend every consultation meeting and suggest genuine alternatives. Keep written records of everything — emails, meeting notes, the lot.
Our free Redundancy Pay calculator will show you exactly what you’re entitled to based on your age, length of service, and weekly pay.