Employee Guide to Redundancy
Understanding your rights, entitlements, and the redundancy process in the United Kingdom
What Is Redundancy?
Redundancy is a form of dismissal from your job that occurs when employers need to reduce their workforce. It's a genuine redundancy if:
- Your employer closes down the business
- Your workplace is closing or moving
- There's less work to do (reduced demand for employees)
- Your job or particular role is no longer needed
Am I Eligible for Redundancy Pay?
Eligibility Requirements
- Have worked for your employer continuously for at least 2 years
- Be an employee with an employment contract
- Be genuinely redundant (not dismissed for another reason)
Not eligible? Even if you don't qualify for statutory redundancy pay, you may still be entitled to:
- Notice pay (statutory minimum or contractual, whichever is longer)
- Payment for any untaken holiday days
- Any outstanding wages or pay
How Is Redundancy Pay Calculated?
Statutory redundancy pay is calculated based on your age, length of continuous service, and weekly gross pay.
For each full year under 22 years old
For each full year aged 22 to 40 years
For each full year aged 41 years and over
Important Limits
- Maximum 20 years' service counts towards the calculation
- Weekly pay capped at £719 (from 6 April 2025)
- Maximum total payment of £21,570
Tax Treatment
Understanding how redundancy payments are taxed is crucial for financial planning:
The first £30,000 of statutory redundancy pay and ex-gratia payments is usually tax-free and not subject to National Insurance.
Holiday pay and payment in lieu of notice (PILON) are always taxed as earnings and subject to Income Tax and National Insurance.
Notice Periods
Your employer must give you a minimum statutory notice period, or longer if specified in your contract: