🇬🇧 UK · Redundancy · Step-by-step guide
Made redundant? Here's exactly what you're owed
Being made redundant involves multiple different payments — statutory redundancy pay, notice pay, holiday pay, and possibly a settlement. Most people don't claim everything they're entitled to. Work through each step below to make sure you don't leave money behind.
Calculate your statutory redundancy pay
Statutory redundancy pay depends on your age, length of continuous service, and weekly pay (capped at £751/week for 2026/27). Only the last 20 years count. The maximum statutory payment is £22,530. Your employer may offer more — check your contract or company handbook for an enhanced redundancy policy.
- Under 22: 0.5 weeks' pay per full year of service
- Age 22–40: 1 week's pay per full year of service
- Age 41+: 1.5 weeks' pay per full year of service
Check your notice entitlement
You're entitled to either your statutory minimum notice or your contractual notice — whichever is greater. Statutory notice runs from 1 week (after 1 month's service) to 12 weeks (after 12+ years). Your employer can ask you to work it, put you on garden leave, or pay it as PILON.
- 1 month–2 years: 1 week
- 2–12 years: 1 week per completed year
- 12+ years: 12 weeks (maximum statutory)
Understand PILON vs garden leave
If your employer wants you to leave immediately, they'll either pay you in lieu of notice (PILON) or put you on garden leave. Both result in the same gross pay — but the implications for your benefits, share vesting, and post-employment restrictions are very different.
- PILON: employment ends immediately; benefits stop; restrictions run from today
- Garden leave: you stay employed but don't work; benefits continue; restrictions start later
- Both PILON and garden leave pay are fully taxable as earnings
Claim your accrued holiday pay
Any accrued but untaken holiday must be paid at termination — this is a statutory right under the Working Time Regulations 1998. Your employer cannot refuse. The value is calculated on your average weekly pay over the previous 52 paid weeks (holiday weeks are excluded from the average).
- Statutory minimum: 5.6 weeks (28 days for full-time workers)
- Your contract may give you more — the total accrued amount is owed
- Holiday pay is taxable as earnings
Review any settlement agreement
Your employer may offer a settlement agreement (formerly a compromise agreement) instead of, or on top of, your statutory entitlements. You must receive independent legal advice before signing — your employer usually pays a contribution of £250–£500 towards this cost. The first £30,000 of genuine termination payments is tax-free.
- The first £30,000 of a genuine termination payment is free of income tax and NI
- PILON and holiday pay within the agreement are fully taxable regardless
- Always negotiate the reference wording and any restrictive covenants
Redundancy checklist
Frequently asked questions
How long do I have to claim redundancy pay?
You must claim statutory redundancy pay within 6 months of your dismissal date. If your employer fails to pay, you can apply to the Redundancy Payments Service (RPS) within 6 months if your employer is insolvent, or bring a tribunal claim. Always act well within the 6-month deadline — extensions are rarely granted.
Can my employer make me redundant while on sick leave or maternity leave?
Your employer can make your role genuinely redundant while you are on sick leave or maternity leave. However, if you are on maternity leave, you have the right to be offered any suitable alternative vacancy that exists before other employees. Being selected for redundancy because of pregnancy or maternity leave is automatically unfair dismissal and discrimination — there is no qualifying period for this protection.
What is the redundancy consultation process?
If you are being made redundant, your employer must follow a fair consultation process. For fewer than 20 redundancies, there is no statutory minimum consultation period — but they must consult you individually, explain the reasons, consider alternatives, and use a fair selection process. For 20 or more redundancies at one establishment within 90 days (collective redundancy), a minimum 30-day consultation period applies (45 days if 100+). Failing to consult can give you a 'protective award' on top of your other entitlements.
Is statutory redundancy pay taxable?
Statutory redundancy pay itself is tax-free. The first £30,000 of your total termination payment (including statutory and enhanced redundancy pay, and any ex-gratia payment) is free of income tax and National Insurance. However, PILON, accrued holiday pay, and any amounts above £30,000 are taxable.