Statutory Redundancy Explained [Employee Guide]

An introduction to statutory redundancy

Losing your job is never easy. Beyond the emotional impact, redundancy often leaves employees uncertain about their rights and financial security. The good news is that UK law provides protection through statutory redundancy.

This means, if you are eligible, your employer must provide notice and pay to help ease the transition. Knowing what you’re entitled to under UK statutory redundancy rules gives you confidence at a time when things may feel unclear.

In this guide, we explain everything you need to know about statutory redundancy including the process, your rights, how it’s calculated and more.

What is statutory redundancy?

Statutory redundancy is the legal minimum payment and notice period an employer must provide to eligible employees who are dismissed due to redundancy.

Unlike enhanced or contractual redundancy packages that some employers may offer, statutory redundancy is a legal entitlement. It applies nationwide and is based on specific eligibility criteria.

When does statutory redundancy apply?

Redundancy has a specific legal meaning in UK law, and not all dismissals qualify for statutory redundancy.  You are considered redundant if your employer:

• Closes the business altogether
• No longer needs anyone to do your job, because the work has stopped or has been reduced
• Shuts down the place of work where you were based (even if the wider business continues)
• Reduces the number of employees doing similar work across the organisation or at your location.

There are a few practical nuances to be aware of. For example, a reorganisation that significantly changes your role can amount to redundancy if the original job no longer exists. However, minor changes to your role usually won’t count.

Who is eligible for statutory redundancy

To qualify for a statutory redundancy payment, you must be an employee with at least two years’ continuous service.

In practice, here’s how eligibility and service commonly work:

• You must be an employee. If you’re self-employed or a contractor, you will not usually qualify for UK statutory redundancy
• You must have been employed continuously with the same employer for at least two years. If you moved between group companies without a break or had an authorised gap, you may still be eligible
• If your employment transferred under TUPE, your start date usually carries over, so pre-transfer service counts towards the two-year threshold for a statutory redundancy payment
• Fixed-term and part-time employees can still qualify for statutory redundancy if they have two years’ service.

In all cases, you must have been dismissed due to genuine redundancy rather than misconduct or resignation. If you are close to the two-year point or unsure whether a transfer or break counts, it’s worth seeking advice before final decisions are made.

Dismissals for performance issues, capability, or misconduct

Dismissals for performance issues, capability, or misconduct do not count as redundancy and will not give rise to a statutory redundancy entitlement. Likewise, disagreements or relationship breakdowns generally fall outside redundancy unless the job itself is genuinely disappearing.

Sometimes – in such situations – instead of completing a full redundancy process, your employer may propose a Settlement Agreements to bring matters to a close on agreed terms. This can provide certainty and a clean break.

You must receive independent legal advice for a settlement agreement to be valid. In practice, your employer typically covers the legal fees. At GTE, our settlement agreement lawyers can review and sign off on the contract on the same day. Allowing you to move forward with confidence.

The redundancy process

During redundancy, employers must follow a fair and transparent process. This usually includes the following steps:

Consultation with employees

A redundancy consultation means a genuine two-way conversation. The outcome must not be predetermined, and your employer should:

• Remain open to alternatives
• Share their reasons and proposed selection criteria
• Give you enough information and time to respond
• Genuinely consider any suggestions or challenges before making a final decision.

In larger exercises (20 or more redundancies in 90 days at a single establishment), this may include a collective redundancy with elected employee representatives, alongside individual meetings.

Fair selection from a reasonable ‘pool’

Where only some roles are at risk, employers should identify a sensible selection pool and use objective, non-discriminatory criteria (for example, skills, qualifications, performance, disciplinary record).

Your employer should explain how the pool was defined and how scoring works. If you feel criteria or scoring are unfair or discriminatory, raise this calmly during consultation and keep notes of your meetings.

Consideration of alternative roles within the business

Employers must actively look for suitable alternative employment and discuss any vacancies with you. More on this coming up…

Providing written notice of redundancy

If your redundancy is confirmed, you should receive written confirmation setting out the dismissal date, your notice period (or payment in lieu), any accrued holiday, and your redundancy payment entitlement.

Failure to follow these steps could amount to unfair dismissal. However, sometimes, instead of continuing through every stage, an employer may propose a settlement agreement to bring matters to a close on agreed terms.

Your rights during the statutory redundancy process

When facing redundancy, your contractual rights and benefits continue, whether you are working your notice, on garden leave, or receiving payment in lieu of notice (PILON). So, you are entitled to fair treatment while planning your next step.

Pay and benefits

• You are entitled to your normal salary and contractual benefits for the duration of your notice (or an equivalent lump sum if you receive PILON)
• If your hours or pay vary, statutory notice pay should reflect your average pay (typically based on the previous 12 weeks)
• Pension contributions and other benefits usually continue while you remain employed (including during garden leave). Specifics can depend on your employment contract.

Holiday and leave

• You continue to accrue holiday entitlement throughout your notice period
• You can usually take remaining annual leave during notice, subject to approval and business needs
• Your employer can also require you to take leave with the correct amount of notice
• Any untaken holiday at the end of employment should be paid to you.

Time off to look for work or training

• If you are under a redundancy notice and have at least two years’ continuous service, you are entitled to ‘reasonable’ paid time off during working hours to attend interviews or arrange training for a new job
• Speak to your employer about how this will work in practice, as you may not be paid fully for any time off.

If your employer fails to provide the correct notice, notice pay, or holiday pay, you can challenge this and, if needed, make a claim to an employment tribunal.

Offers of suitable alternative employment

If possible, your employer should offer you ‘suitable alternative employment’ within your organisation or an associated company. This means a job that:

• Is similar to your current job in terms of the work required
• Requires a comparable level of skills and abilities
• Is on similar terms and conditions (including pay, benefits, status, hours and location).

Employees have a legal right to a four-week trial period in any alternative role. If you decide the job is unsuitable within the trial, you keep your redundancy rights. However, staying beyond four weeks without an agreed extension may forfeit those rights.

If you are offered suitable alternative employment and unreasonably refuse it, your entitlement to a statutory redundancy payment may be affected, so it’s sensible to take advice before deciding.

If you are on, or have recently taken, maternity leave or other types of parental leave, your employer MUST offer you a suitable alternative job (if available).

Special protections in redundancy

UK law provides additional protections in redundancy for employees who are pregnant or on certain forms of family leave. This includes employees who are:

• Pregnant
• Taking maternity leave
• Taking adoption leave
• Taking shared parental leave
• Taking neonatal care leave.

These protections sit alongside your normal rights to statutory redundancy notice and a statutory redundancy payment if eligible.

Priority for suitable alternative vacancies

If you are on maternity leave, shared parental leave or adoption leave (or within the extended protected period) and your role is redundant, you should be given priority for any suitable vacancies. This applies even if other employees are also suitable.

Process and communication

Consultations should still be meaningful and accessible (for example, remote meetings can be used if you are on leave). You should not be disadvantaged for being on leave.

The statutory redundancy notice period

If you are facing redundancy, you are entitled to a minimum notice period. The statutory redundancy notice rules are clear:

• Less than one month of service: No notice required (unless contractually agreed otherwise)
• One month to less than two years of service: At least one week’s notice
• Two – 12 years’ service: One week’s notice for each year of service
• 12 years or more: Capped at 12 weeks’ notice.

Your employer may ask you to work your notice, place you on garden leave, or pay you instead of notice (known as payment in lieu of notice, or PILON).

Here is what each option means in practice:

Working your notice

Your employer may want you to remain in your role until the end date. If you do, you will:

• Receive your normal salary and benefits
• Continue to accrue holiday and service during the notice period.

If you have at least two years’ service, you are entitled to reasonable time off to look for a new job or arrange training during this period. However, the most your employer has to pay you for this time off is 40% of one week’s pay. Any extra time off can be unpaid, unless your employer agrees to pay more. Your normal wages for the hours you work are unaffected.

Garden leave

You may be offered garden leave once the redundancy is confirmed (or a settlement agreement is being negotiated). This means you will:

• Stay employed and on full pay and benefits, but do not attend work or perform duties
• Continue to accrue holiday and service while on garden leave.

Usually, you will not be able to start a new role, contact clients, or access confidential information until your employment ends. In addition, if you have signed a settlement agreement, certain restrictions may continue to apply after you have formally left your employment.

Payment in lieu of notice (PILON)

If your contract allows, or if you agree to it, your employer may terminate your employment immediately and pay you PILON. This means:

• Your employment ends immediately
• You receive a lump sum equivalent to what you would have earned during the notice period
• The payment is treated as taxable earnings (unlike statutory redundancy pay, which is tax-free up to £30,000).

Any untaken holiday should be paid separately.

Statutory redundancy pay – the basics

Your statutory redundancy payment is designed to reflect your length of service and age at the time redundancy is confirmed. It is calculated using a government-set formula:

• 0.5 week’s pay for each full year of service under age 22
• 1 week’s pay for each full year of service, aged 22 or older (but under 41)
• 1.5 weeks’ pay for each full year of service, aged 41 and over.

The formula looks at your age in each full year of service, not just your age at dismissal. Additionally, the calculation only applies to a maximum of 20 years’ service, even if you have worked for a longer period.

Example: A 30-year-old employee with five full years of service will receive:

• 5 years x 1 week = 5 weeks of capped weekly pay.

Example: A 45-year-old employee with 10 full years of service will receive:

• 6 years (aged 35-40) × 1 week = 6 weeks
• 4 years × 1.5 weeks (aged 41 +) = 6 weeks
• Total = 12 weeks of capped weekly pay.

Your payment is then calculated using your weekly wage, but limited to the government’s statutory maximum (reviewed annually).

Maximum statutory redundancy

There is a cap on the total redundancy payment you can receive, known as the maximum statutory redundancy. This is the highest amount of redundancy pay that can be awarded under UK law, regardless of salary or length of service.

There are two figures to consider when calculating the maximum statutory redundancy pay possible:

• Weekly pay cap: Even if you earn above the weekly limit, the capped figure is used. For example, if the cap is £719 and your normal weekly pay is £900, redundancy calculations will use £719.
• Maximum years’ service: Statutory redundancy pay has a 20 years’ service limit (with years 41+ worth 1.5 weeks). So, the absolute statutory maximum is 30 weeks’ pay.

Taken together, the maximum statutory redundancy is calculated as: maximum 30 weeks × capped weekly pay. So, assuming the capped weekly pay is £719, the most you could get is £21,570.

For those with long service in the higher age bracket, this maximum may be reached. Employers are not legally obliged to pay more unless your contract provides enhanced redundancy terms.

Statutory redundancy pay 2025/26

Every April, the government reviews the weekly pay cap used to calculate redundancy. This means that the figures for statutory redundancy pay in 2025/26 will differ from those in previous years.

If you were made redundant on or after 6 April 2025, your weekly pay is capped at £719, and the maximum statutory redundancy pay you can get is £21,570. These figures will likely change from April 2026.

You can calculate your redundancy pay on the government website. Different limits apply in Northern Ireland.

Statutory redundancy pay and tax

Redundancy payments are often confused with salary or notice pay when it comes to tax. To make sure you understand what you are entitled to, the rules are:

• Statutory redundancy pay up to £30,000 is tax-free
• Anything above £30,000 may be subject to income tax and National Insurance
• Notice pay (including PILON) and holiday pay are always taxable, as they are considered normal earnings.

Most employees will find that their entire statutory redundancy payment is tax-free.

If your employer can’t pay redundancy due to insolvency

Where an employer is insolvent and cannot pay statutory entitlements, you can claim certain sums from the government. You must apply for redundancy pay, unpaid wages and holiday pay within six months of being dismissed.

The person dealing with the insolvency (the insolvency practitioner or official receiver) will give you a CN (case reference) number. You will need this number to file a claim.

You can apply for statutory redundancy on the government website. This safety net helps ensure that eligible employees still receive their UK statutory redundancy entitlements when an employer is unable to pay.

The difference between statutory and contractual redundancy

Some employers offer enhanced redundancy packages. These policies sit on top of the legal minimum. It’s important to distinguish between the statutory minimum and any contractual entitlements in your employment agreement.

• Statutory redundancy: The minimum amount set by law.
• Contractual redundancy: Enhanced terms that some employers offer, often more generous than the statutory minimum.

Your employer cannot offer you less than the statutory minimum. However, if your contract provides enhanced redundancy, you are entitled to the higher amount.

When reviewing your contractual redundancy entitlements, be sure to look at:

• Any service thresholds, and whether disciplinary status or performance processes affect eligibility
• The calculation method used. Some policies mirror the statutory formula but remove the cap or add extra weeks; others pay a flat multiple of salary
• Whether any enhanced sums are conditional on working notice or waiving rights under a settlement agreement.

If a policy is unclear, ask HR to confirm in writing how it applies to you.

Settlement agreements and redundancy

Some employers may offer a settlement agreement as an alternative to going through the statutory redundancy process. A settlement agreement is a legally binding contract in which you agree to waive your rights to pursue specific employment claims, usually in exchange for a financial settlement.

In many cases, the settlement agreement will offer at least the equivalent of UK statutory redundancy, often with additional benefits.

When reviewing a settlement agreement, focus on:

• Compensation offered: What is being offered in return for your agreement to sign the settlement agreement? It should explain your statutory entitlements (notice, holiday, statutory redundancy payment) plus any ex-gratia compensation
• Rights waived: Ensure the agreement clearly lists the specific claims you’re giving up (e.g. unfair dismissal, redundancy-related claims, discrimination, etc.). The waiver should not extend to future claims arising after termination
• Payments and tax treatment: Check there is a clear split between taxable sums (e.g. salary, PILON, holiday, etc.) and ex-gratia compensation (often tax-free up to £30,000)
• Notice handling: The agreement should specify whether you will receive notice, be on garden leave, or receive PILON, along with the applicable dates.
• Reference & announcements: It’s essential to agree on wording for references and internal/ external announcements to support your next role.
• Post-termination restrictions: Check any restrictive covenants (e.g. non-compete, non-solicitation, etc.). Your solicitor can advise if they’re reasonable.

A well-drafted agreement prevents disputes and helps you move on smoothly. Importantly, employers usually cover the cost of your legal advice, so you can receive same-day independent advice and sign-off at no cost to you.

FAQ’s about statutory redundancy

It’s natural to have questions about redundancy. Here are clear answers to some of the most common queries.

Contact GTE Settlement Agreement Solicitors today

Redundancy can feel overwhelming. Whether you are receiving a straightforward statutory redundancy payment or have been offered a settlement agreement, knowing your entitlements provides reassurance and clarity.

If you’ve been offered a settlement agreement, we provide:

• Same-day legal advice and sign-off
• A straightforward, supportive process
• No cost to you (your employer covers our legal fees)
• Reassurance that your agreement is fair and legally sound

With our nationwide service, you can move forward with confidence, secure in the knowledge that your rights have been protected. Call today for your free consultation on 020 7247 7190 or complete the simple enquiry form on this page.