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What is Redundancy?

Before exploring your rights, it helps to understand exactly what redundancy means in UK employment law. Redundancy is not just another word for being sacked. It has a specific legal definition that determines whether you qualify for certain protections and payments.

Legal Definition

Under the Employment Rights Act 1996, redundancy occurs when an employer dismisses an employee because:

  • The business is closing down – The employer has ceased, or intends to cease, carrying on the business entirely
  • The workplace is closing – The employer has ceased, or intends to cease, carrying on the business at the location where you work
  • The work has reduced – The requirements for employees to carry out work of a particular kind have ceased or diminished, or are expected to

In simple terms, redundancy happens when your employer no longer needs anyone to do your job, not because of anything you have done wrong. The key point is that the job itself is disappearing, not that you are being replaced by someone else.

💡 Key Points

  • Redundancy is a form of dismissal – you are losing your job
  • It must be genuine – your job role needs to actually disappear
  • You have legal rights protecting you during the process
  • You may be entitled to statutory redundancy pay

Genuine vs Non-Genuine Redundancy

Not every dismissal that an employer calls redundancy is actually genuine. Some employers misuse the term to disguise unfair dismissals or to avoid following proper procedures. Understanding the difference is important because you have different rights depending on whether the redundancy is genuine.

Signs of genuine redundancy:

  • Your employer can show a real business reason for reducing staff
  • The work you do has genuinely reduced or will stop
  • Your employer is not hiring someone else to do the same job
  • The redundancy applies to a role, not specifically to you as a person
  • Your employer follows a fair selection process if choosing between employees

⚠ Warning Signs of Non-Genuine Redundancy

Your employer advertises your job shortly after making you redundant, someone else is hired to do substantially the same work, you are the only person selected from a group doing similar work without clear criteria, the redundancy follows a grievance or whistleblowing, or you are selected while pregnant or on maternity leave. If you suspect your redundancy is not genuine, you may have grounds for an unfair dismissal claim.

Your Redundancy Rights

UK employment law gives you several important rights when facing redundancy. These rights apply whether your employer is a small business or a large corporation, although some specific requirements vary depending on the number of people affected.

💬 Right to Consultation

Your employer cannot simply announce you are redundant and show you the door. They must consult with you before making any final decision. Consultation should be a genuine two-way conversation.

💰 Right to Redundancy Pay

If you have worked for your employer for 2+ years, you are entitled to statutory redundancy pay based on your age, length of service, and weekly pay.

📅 Right to Notice

You are entitled to a notice period before your employment ends. This gives you time to prepare and look for new work. Your contract may give you more notice than the statutory minimum.

🔍 Right to Fair Selection

If your employer needs to choose who to make redundant from a group of employees doing similar work, they must use fair and objective selection criteria.

Right to Time Off for Job Hunting

If you have been continuously employed for at least two years, you have a statutory right to reasonable paid time off during your notice period to look for new employment or arrange training for future employment.

The law does not specify an exact amount of time off. What is “reasonable” depends on your circumstances, including your notice period length and local job market.

💡 What if your employer refuses?

  • Under ERA 1996 s.52-53, if your employer unreasonably refuses to allow you time off, you can make a complaint to an employment tribunal
  • If successful, the tribunal can award compensation of up to 40% of one week’s pay
  • This 40% figure is the maximum tribunal remedy for unreasonable refusal, not a guaranteed payment
  • You may bring a tribunal claim within 3 months less 1 day if refused unreasonably

Right to Alternative Employment

Before making you redundant, your employer must consider whether any suitable alternative employment exists within the organisation. This includes roles in associated companies within the same group. If you accept an alternative role, you have a statutory right to a trial period of at least four weeks.

The Redundancy Process

Understanding what should happen at each stage of the redundancy process UK employers should follow helps you know whether you are being treated fairly.

1

Announcement Stage

Your employer announces that redundancies are being considered. You may be told your role is at risk and should receive information about the proposed consultation process.

2

Consultation Stage

Your employer should hold meetings with you to discuss the proposed redundancy. This is your opportunity to ask questions, suggest alternatives, and challenge selection criteria if you think they are unfair.

3

Selection Process

Your employer should define the selection pool, establish fair and objective criteria, apply them consistently, and discuss provisional selection with affected employees before finalising.

4

Alternative Employment

Your employer should consider whether any suitable alternative roles are available. If offered an alternative, you have a statutory right to a trial period of at least four weeks.

5

Notice Period

Once the decision is final, you are given formal notice. During your notice period, you continue to work and receive normal pay, can take time off to look for work, and continue to accrue holiday.

6

Final Day

On your last day, you should receive your final wages, payment for accrued but untaken holiday, your statutory redundancy payment (if eligible), any enhanced redundancy payment, and a P45 tax form.

Redundancy Pay Explained

If you qualify, you have a legal right to redundancy pay. This is not a bonus or a favour from your employer; it is money you are entitled to by law.

Statutory Redundancy Pay

To qualify for statutory redundancy pay, you must be an employee (not a worker or contractor), have at least 2 years’ continuous service, and be dismissed because of redundancy.

How It Is Calculated

Statutory redundancy pay is based on your age, length of service, and weekly pay:

  • Half a week’s pay for each complete year of service when you were under 22
  • One week’s pay for each complete year when you were aged 22 to 40
  • One and a half weeks’ pay for each complete year when you were 41 or older

💰 2025 Statutory Limits

  • Maximum weekly pay: £719
  • Maximum years counted: 20
  • Maximum statutory payment: £21,570

Enhanced Redundancy Packages

Many employers offer more than the statutory minimum. Enhanced redundancy pay might include a multiplier of statutory pay, additional weeks’ pay per year of service, your actual weekly pay rather than the capped amount, or a fixed ex-gratia payment on top of statutory. Check your employment contract, staff handbook, and any company policies to see if you are entitled to enhanced terms.

✓ Good News

The first £30,000 of your redundancy payment is tax-free. This includes statutory redundancy pay and most enhanced payments.

Payment Timing

Your redundancy pay should be paid on or shortly after your final day of employment. If your employer does not pay, you can write to them formally requesting payment, contact ACAS for advice, or make an employment tribunal claim within 6 months of leaving. If your employer is insolvent, you can claim statutory redundancy pay from the government through the Redundancy Payments Service.

Notice Periods

Your notice period is separate from your redundancy pay. You are entitled to both.

Statutory Notice

The law sets minimum notice periods based on your length of service:

  • Less than 1 month of service: No statutory notice
  • 1 month to 2 years: 1 week
  • 2 to 12 years: 1 week for each complete year
  • 12 years or more: 12 weeks (maximum)

Contractual Notice

Your contract may give you a longer notice period than the statutory minimum. For example, many professional roles have 1 or 3 months’ contractual notice. You are entitled to whichever is longer: statutory or contractual.

Payment in Lieu of Notice (PILON)

Instead of working your notice, your employer may offer to pay you for it and let you leave immediately. This is called payment in lieu of notice. Key points about PILON:

  • Whether your employer can insist on PILON depends on your contract
  • PILON is taxed as normal earnings (unlike redundancy pay up to £30,000)
  • You should receive full pay for the notice period you would have worked
  • Your continuous service usually ends on the date you actually leave

Settlement Agreements

Your employer may offer you a settlement agreement as part of the redundancy process. Understanding what this means is important before you sign anything.

What is a Settlement Agreement?

A settlement agreement (formerly called a compromise agreement) is a legally binding contract between you and your employer. In exchange for a payment (usually more than your statutory entitlements), you agree to give up certain rights, typically the right to bring an employment tribunal claim.

What a Settlement Agreement Might Include

  • An enhanced redundancy payment
  • Payment for outstanding holiday and notice
  • A contribution towards your legal fees (typically £350 to £500)
  • An agreed reference
  • Outplacement support or career coaching
  • Confidentiality provisions and non-disparagement clauses

Should You Sign?

Whether to sign a settlement agreement depends on your circumstances. You might sign if the payment is generous and more than you could get at tribunal, you want a clean break and certainty, and the agreed reference will help your job search. You might not sign if you believe you were unfairly selected or discriminated against, the payment does not reflect what you could claim at tribunal, or there are terms in the agreement you are not comfortable with.

⚠ Getting Legal Advice

For a settlement agreement to be legally valid, you must receive independent legal advice from a qualified adviser, usually a solicitor. Your employer typically pays a contribution towards this cost. Do not sign until you have received this advice. A good adviser can often help you negotiate better terms.

Unfair Redundancy

Not all redundancies are fair. If your employer has not followed proper procedures or has selected you for unlawful reasons, you may have a claim for unfair dismissal.

Automatic Unfair Selection

Some reasons for selecting someone for redundancy are automatically unfair, regardless of how long you have worked there. These include:

  • Pregnancy and maternity – Selection because you are pregnant, on maternity leave, or have recently given birth
  • Family leave – Selection because you took or requested paternity, adoption, shared parental, or parental leave
  • Part-time or fixed-term status – Being treated less favourably because you work part-time or on a fixed-term contract
  • Trade union membership – Selection because you are or are not a union member, or because of union activities
  • Whistleblowing – Selection because you made a protected disclosure about wrongdoing
  • Health and safety – Selection because you raised health and safety concerns

Procedural Failures

Even if the reason for redundancy is genuine, the dismissal can be unfair if your employer did not follow a fair procedure. Examples include no consultation or sham consultation, failing to consider alternatives, using unfair or subjective selection criteria, and not allowing you to appeal the decision.

🛈 Time Limits for Making a Claim

  • You have 3 months less 1 day from your dismissal date to bring an employment tribunal claim
  • You must start ACAS early conciliation first – this is mandatory
  • The deadline is strict – miss it and you will almost certainly lose your right to claim
  • The current maximum compensatory award is the lower of 52 weeks’ pay or £115,115 (2025 figures)

What to Do Next

Losing your job is difficult, but there are practical steps you can take to move forward.

  • 1
    Calculate your redundancy pay Use our calculator to know what you are entitled to, and check your contract for enhanced terms.
  • 2
    Keep records of all meetings and communications Gather your employment contract, payslips, redundancy letters, and any correspondence about your redundancy.
  • 3
    Engage meaningfully in consultation Attend meetings, ask questions, and suggest alternatives such as reduced hours, redeployment, or voluntary redundancy.
  • 4
    Consider alternative roles carefully If offered an alternative position, you can trial it for up to 4 weeks. If you reasonably decide it is not suitable, you keep your redundancy pay entitlement.
  • 5
    Seek advice if you have concerns about fairness Contact ACAS for free, impartial guidance. If offered a settlement agreement, get independent legal advice before signing.
  • 6
    Start your job search and consider retraining Use your right to time off to look for new work. Update your CV, tell your network, and consider free government training options like Skills Bootcamps.

Claiming Benefits

If you are out of work and looking for a new job, you may be able to claim Universal Credit. Redundancy pay up to £6,000 does not affect Universal Credit; between £6,000 and £16,000 it reduces your payment; and if you have over £16,000 in savings (including redundancy pay), you cannot claim.