🇬🇧 UK · Employment Law · Updated 2026-06-27
Resignation vs redundancy: how your rights differ
Whether you leave a job voluntarily (resignation) or involuntarily (redundancy) dramatically affects what money you're owed, your access to benefits, and your ongoing rights. If your employer is pressuring you to resign rather than making you redundant, you may be losing significant entitlements — understanding the difference is critical.
Key differences at a glance
| Aspect | Resignation | Redundancy |
|---|---|---|
| Who initiates | You — you choose to leave | Your employer — they eliminate your role |
| Statutory redundancy pay | None — resignation carries no redundancy pay entitlement | Yes — up to £22,530 for eligible employees with 2+ years' service |
| Notice entitlement | You must give your contractual or statutory minimum notice period to your employer | Your employer must give you statutory or contractual notice (or PILON) |
| Tax-free payment | None (unless leaving as part of a settlement) | Redundancy pay up to £30,000 total termination payment is tax-free |
| Universal Credit / JSA | Voluntary unemployment may result in a benefit sanction period (typically 9–26 weeks) | No sanction for redundancy; redundancy pay is disregarded for Universal Credit purposes for first 26 weeks |
| P45 and final pay | Employer must provide P45 and pay outstanding wages/holiday within the last payroll cycle | Same, plus statutory redundancy pay (and any enhanced pay) on or before agreed date |
| Constructive dismissal risk | If forced/pressured to resign, this may be constructive dismissal — and treated as redundancy for pay purposes | N/A — genuinely involuntary |
| COBRA / health insurance (US context) | Resignation typically qualifies for COBRA continuation at full premium cost | Redundancy/layoff qualifies for COBRA; may also qualify for Medicaid/ACA subsidised plan |
The bottom line
Never resign under pressure without understanding what you are giving up. If your employer is threatening dismissal or making your working conditions untenable to force a resignation, this may be constructive dismissal — which entitles you to the same rights as redundancy. If you are genuinely in a redundancy situation, insist on being made redundant rather than resigning: the difference can be £22,530 in redundancy pay plus a tax-free exit, versus nothing.
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Calculate →Frequently asked questions
If I resign during a redundancy consultation, do I still get redundancy pay?
It depends on timing. If you resign during the notice period given to you in a redundancy situation (after being told your role is at risk and given a termination date), you may still be entitled to statutory redundancy pay under ERA 1996 s.136(3), provided you give the employer written notice during the statutory notice period. However, resigning before you are formally put at risk of redundancy typically ends your entitlement. Take advice before resigning during any redundancy process.
Can my employer ask me to resign instead of making me redundant?
Employers often prefer employees to resign rather than be made redundant — it avoids paying redundancy pay and can avoid the appearance of a dismissal. You are under no legal obligation to resign. If the role is genuinely redundant and you have 2+ years' service, you are entitled to be formally made redundant and to receive redundancy pay. Agreeing to resign to avoid the formal process is giving up significant legal rights.
What notice must I give if I resign?
You must give the notice specified in your employment contract. If your contract is silent, the statutory minimum is 1 week after 1 month's employment. Most contracts specify 1–3 months for professional roles. Failing to work or pay in lieu of your full notice period can result in a breach of contract claim by your employer, though this is rarely pursued in practice for junior roles.
Does redundancy affect my state pension?
Being made redundant does not directly reduce your state pension entitlement — your qualifying years are not affected. However, if you are out of work for an extended period and not making National Insurance contributions, this can affect future state pension accrual. You may be able to claim National Insurance credits while on Universal Credit or JSA, which protects your qualifying years.
What if my employer offers me a settlement agreement to leave?
A settlement agreement (formerly called a compromise agreement) is a legally binding agreement to end your employment. The employer typically offers an enhanced exit package in exchange for you giving up your right to bring tribunal claims. A settlement agreement must be signed with independent legal advice to be valid — your employer usually contributes to your legal fees. Carefully compare the settlement offer against what you would receive through a redundancy process before signing.