Redundancy in the UK: A Practical Guide

What this guide covers

• Who is eligible for statutory redundancy pay
• How your pay is calculated
• What counts as genuine redundancy
• Notice periods and garden leave
• Alternatives to dismissal — redeployment
• Tax and redundancy pay
• What to do after being made redundant

Who is eligible for statutory redundancy pay

To qualify for statutory redundancy pay you must:

• Be an employee — not a freelancer, contractor, or agency worker
• Have at least 2 years of continuous service with the same employer
• Be dismissed because of genuine redundancy

If you were made redundant after less than 2 years with the company, you may still have claims for unfair dismissal — but not for statutory redundancy pay specifically. Check with ACAS to understand your full position.

How your statutory redundancy pay is calculated

The formula uses three factors: your age, your gross weekly pay, and how long you have worked for the company. Older employees with longer service receive more — the multiplier increases with age.

Use our calculator to work out your specific entitlement in seconds.

What counts as genuine redundancy

UK law (Employment Rights Act 1996, s.139) defines genuine redundancy as a genuine business situation — not a pretext to dismiss someone for another reason. It applies when:

• The employer ceases to carry on the business, or the work the employee does ceases or diminishes
• The employer changes the requirements of the business for employee work to be done by fewer or different people
• The employee is placed at a disadvantage in relation to their role

A genuine redundancy situation is one where the employer can honestly demonstrate the basis for the decision. If you believe the real reason for your dismissal was something else — for example, discrimination or a personal dispute — you may have grounds for an unfair dismissal claim on top of your redundancy entitlement. Citizens Advice can help you assess whether this applies to your situation.

Notice periods and garden leave

Your contract will specify a notice period, but by law you are entitled to a minimum based on how long you have worked there:

• At least 1 week for employees with 1 month to 2 years of service
• 1 week per year for employees with 2 to 12 years of service
• 12 weeks maximum for employees with 12 or more years of service

Your employer may either give you your full notice period to work out, place you on garden leave (pay you to stay at home during the notice period), or make a payment in lieu of notice (PILON) — depending on what your contract says. Check your contract for which applies to you.

Alternatives to dismissal — redeployment

Before dismissing someone for redundancy, UK law requires employers to explore whether there are suitable alternative roles available. This means:

• Searching for comparable roles within the organisation or group companies
• Offer the role with retraining if needed
• Holding a consultation meeting to discuss alternatives

If a suitable alternative role exists and you unreasonably refuse it, you may lose your entitlement to statutory redundancy pay. Always attend consultation meetings and consider offers seriously — but also seek advice if the alternative role is significantly different or worse. ACAS has guidance on consultation.

Tax and redundancy pay

One of the most important things to know: your statutory redundancy pay has a significant tax advantage.

• The first £30,000 of your statutory redundancy pay is completely tax-free
• Any amount above £30,000 is treated as earnings and subject to Income Tax and National Insurance
• This £30,000 threshold applies to your total statutory redundancy pay from all redundancy events in a tax year

Note: this tax-free treatment applies to statutory (legal minimum) redundancy pay only. Any contractual or enhanced redundancy scheme payments above the statutory minimum may be taxed differently. Your final payslip should show the breakdown clearly.

What to do after being made redundant

Being made redundant is stressful — but having a clear list of next steps can help. Here is what to do:

1. Get your paperwork — written confirmation of redundancy, P45, final pay slip, and any holiday pay owed
2. Check your redundancy calculation — use our calculator to verify you received the correct amount
3. Register for Universal Credit if you do not have another job lined up — do this as soon as possible as claims take time to process
4. Check PIP and bonuses — redundancy payments can affect eligibility for certain benefits temporarily
5. Seek advice if something feels wrong — ACAS helpline is free and confidential: 0300 123 1100