UK Redundancy Rights and Pay Explained for 2026

Redundancy affects a significant number of UK workers every year, and the process brings together several different entitlements at once: statutory redundancy pay, notice pay, and sometimes an enhanced package on top. Getting a clear estimate of what you are owed early on makes it much easier to plan your next steps. Our redundancy pay calculator works through the statutory formula in seconds, and this guide covers everything else around it.

What is redundancy, legally

Redundancy is a specific, legally defined form of dismissal that happens when a job genuinely stops being needed, whether because a business is closing, a particular workplace is closing, or the need for employees to carry out a particular kind of work has reduced or ended. It is not simply a way for an employer to remove an individual they want to let go while calling it redundancy, and doing so can amount to unfair dismissal if the underlying reason is not a genuine reduction in need for the role.

ACAS, the UK's independent workplace relations body, provides free guidance for both employees and employers on what counts as a fair redundancy process, including how selection should work when several people are at risk and only some roles are being cut. If you believe your redundancy is not genuine, or that the selection process was unfair, ACAS early conciliation is usually the first formal step before any employment tribunal claim.

Statutory redundancy pay explained

Statutory redundancy pay is calculated using your age, your years of continuous service, capped at 20 years, and your weekly pay, capped at a maximum figure reviewed every April. The multiplier applied to each year of service depends on how old you were during that specific year of employment, not your age now:

Take someone made redundant at age 45 with 10 complete years of service and a weekly pay of £600, below the statutory cap. The 5 most recent years, worked at ages 45 down to 41, fall in the 1.5 band, contributing 7.5 weeks' pay. The next 5 years, worked at ages 40 down to 36, fall in the 1.0 band, contributing 5 weeks' pay. That is 12.5 weeks' pay in total, so 12.5 × £600 = £7,500 in statutory redundancy pay. Our redundancy pay calculator runs this same calculation for your own age, service and pay automatically.

Notice periods and notice pay

Separately from redundancy pay, you are also entitled to notice, or pay in lieu of it. The statutory minimum is one week's notice for each complete year of service, up to a maximum of 12 weeks for 12 or more years of service. If your contract specifies a longer notice period than the statutory minimum, the longer contractual period applies instead.

Some employers ask you to work your notice as normal, others place you on garden leave, where you remain employed and paid but are not required to attend work, and others pay you in lieu of notice, ending your employment immediately with a lump sum covering the notice period instead. Which approach applies depends on your contract and your employer's process, and it is worth checking which one applies to you early on, since it affects when your final pay date and any related benefits actually end. Our take-home pay calculator can show you what your notice pay looks like after tax, whether you work it or receive it as a lump sum.

Tax on redundancy pay

The first £30,000 of redundancy pay is tax-free, covering statutory redundancy pay and any enhanced or ex-gratia payment combined, though not payments for unused holiday or in lieu of notice, which are usually taxed as normal income. Anything above £30,000 is added to your income for that tax year and taxed at your marginal rate through PAYE, typically in the pay period you actually receive it, which can sometimes push you temporarily into a higher tax band for that single pay period even if your annual income is otherwise lower.

Timing can matter here: if a large redundancy payment straddles the end of one tax year and the start of another, or lands in a year where your income is otherwise unusually low, the overall tax impact can differ. Our UK Income Tax 2026/27 guide explains how the bands work if you want to understand how a large one-off payment interacts with your normal income, and our Income Tax calculator can show the tax due on any specific income figure, including the taxable slice of a redundancy payment above £30,000.

Enhanced redundancy packages

Some employers offer an enhanced or contractual redundancy package on top of, or instead of, the statutory minimum, often using your actual uncapped weekly pay and a more generous number of weeks' pay per year of service than the statutory formula allows. Enhanced packages are common in larger organisations, particularly where a settlement agreement is being offered in exchange for you agreeing not to bring certain employment claims.

There is no fixed industry standard for what counts as generous, since it depends heavily on the employer, the sector, and the specific circumstances of the redundancy round. If you are offered an enhanced package, it is worth checking how it compares to the statutory minimum using our redundancy pay calculator, and whether there is any room to discuss the terms before agreeing, particularly if a settlement agreement is involved.

Your rights during the redundancy process

Employers must consult employees before confirming redundancies, with the required length and formality of consultation depending on how many roles are affected across the organisation. You also have the right to be considered for suitable alternative employment within the organisation where one exists, and a right to a trial period in an alternative role without automatically losing your redundancy entitlement if it turns out not to be suitable.

If you believe your selection for redundancy was unfair, for example based on a protected characteristic or unrelated to the genuine business reason given, you may have grounds for an unfair dismissal or discrimination claim, and ACAS early conciliation is usually a required first step before any employment tribunal claim. Settlement agreements, if offered, should always be reviewed with independent legal advice before signing, since they are legally binding.

Financial planning after redundancy

Once you know roughly what you are owed, it is worth setting aside time to plan your finances for the gap until your next role, or for a longer transition if you are considering a career change. Our savings goal calculator can help you work out how a lump sum redundancy payment stretches against your monthly outgoings if your income drops for a period, and our take-home pay calculator is worth revisiting once you have a new salary, or a different salary, to plan around.

If you do not find work quickly, you may be entitled to new-style Jobseeker's Allowance or Universal Credit, depending on your National Insurance record and household circumstances, so it is worth checking your entitlement on GOV.UK rather than assuming you do not qualify. If you are over 55, you may also have access to your private pension, though drawing it early is a significant decision worth thinking through carefully rather than as an automatic first option. If self-employment or freelancing is on your mind as a next step, our self-employed tax guide is a useful starting point.

Frequently asked questions