Redundancy pay

If you’ve been in the same job for at least two years your employer has to pay you redundancy money. The legal minimum is called ‘statutory redundancy pay’, but check your contract – you might get more.

Are you entitled to redundancy pay?

If you’ve worked continuously for your employer for two years or more and they make you redundant you have the right to redundancy pay.

Statutory redundancy pay and contractual redundancy pay

Statutory redundancy pay is the legal minimum. Your employer can’t pay you less than this.

But they might have to pay you more if your employment contract says so. This could mean a bigger lump sum or getting a payout even if you’ve worked there for less than two years.

If there’s no mention of redundancy in your contract or staff handbook, you should assume you’ll get the legal minimum.

Check your employment contract or staff handbook to find out about your ‘contractual redundancy pay’.

How much redundancy pay will you get?

How much statutory redundancy pay you get depends on:

  • How long you’ve been in the job
  • The age you were in each year you worked there, and
  • Your current salary – up to a maximum of £479 per week (£500 in Northern Ireland)

There is an overall maximum amount of redundancy pay you can get which is capped at £14,370 (£14,700 in Northern Ireland), even if your actual earnings are higher or your length of service is longer than this. Only complete years of service count, and service has to be continuous.

Here’s what you should get:

Your age Redundancy pay
Under 22 Half a week’s pay for each year of service
22 to 40 A week’s pay for each year of service
Over 41 A week and a half’s pay for each year of service

Calculating redundancy pay - An example

Sally (aged 31) has worked part-time as a hairdresser for Curl Up and Dye for 10 years and two months earning £200 a week. She’s just been made redundant.

She gets:

  • Half a week’s pay for the year she worked when she was under 22 = £100
  • Nine week’s pay for the nine years she worked aged 22 to 40 = £1,800

So overall she gets £1,900.

Pay in lieu of notice and holiday pay

Pay in lieu of notice

When you’re made redundant your employer has to give you a minimum of one week’s notice for each year you’ve worked for them (up to a maximum of 12 weeks’ notice). But check your contract – there might be a longer notice period written into it.

You might be expected to carry on working during your notice period, but often you’ll get paid in lieu of notice and you’ll be able to leave earlier, sometimes immediately. Check your employment contract or staff handbook to find out about your notice period.

Holiday pay

Don’t forget holiday pay! If you have holiday owed, your employer has to pay you for it or let you take it before you leave. Find out if you have any holiday owing.

£30,000 is tax free

When you are made redundant, you are likely to receive a mix of redundancy pay (which is compensation for your job loss) and other amounts owed to you.

The first £30,000 of your redundancy pay is tax free – regardless of whether you get the legal minimum or a more generous payout from your employer. You won’t have to pay National Insurance on it either.

But holiday pay, pay in lieu of notice and any other amounts that are pay for your work rather than compensation for the job loss are taxed as pay. Find out more about tax when you’re made redundant by following the link below.

What if your employer’s gone bust?

If your employer goes out of business then you’ll still get statutory redundancy pay and holiday pay owed to you, but you’ll have to claim them from the State rather than from your employer.

To do this, you need to get form RP1 which is available from the Redundancy Payments Service. You’ll need to claim holiday pay and any wages you’re owed at the same time.

Phone the Redundancy Payments Service on 0845 015 0010 to get an RP1 – Redundancy Payments Claim Form.

Your employer isn’t paying up – what can you do?

If you think your employer’s paying the wrong amount of redundancy pay or if you’re unhappy with the way you’re being treated, start by talking to them about it. You could also try your trade union rep if you have one.

If this doesn’t work, you can make a complaint using your employer’s grievance procedure. Otherwise Acas (the Advisory, Conciliation and Arbitration Service) and the Labour Relations Agency offer free, confidential and impartial advice. If matters can’t be resolved you should consider making a claim to the employment tribunal.

Talk to your employer first about any problems.

Visit the Acas website (England, Wales and Scotland) or contact them on 0300 123 1100.
Visit the Labour Relations Agency website (Northern Ireland)opens in new window or contact them on 028 9032 1442.