Redundancy pay

Redundancy is a dismissal that happens because the job itself is disappearing — a site closes, demand falls, or fewer people are needed for the work. Statutory redundancy pay is the minimum payment an employee is owed when that happens, provided they have at least two years' continuous service.

How the payment is worked out

The Employment Rights Act 1996 sets a formula based on three things: the employee's age, their length of service (counted up to a maximum of 20 years), and their weekly pay, which is capped at a statutory limit reviewed each April — the current cap is on GOV.UK. The result is a number of weeks' pay; statutory redundancy pay is tax-free up to a set limit, and the employee must be given a written statement showing the calculation. Many employers pay more than the statutory minimum under contractual schemes.

Process matters as much as the cheque

A redundancy is only fair if the process is: genuine reason, fair selection criteria, meaningful consultation, and consideration of alternative roles (with a four-week trial period where one is offered). Proposing 20 or more redundancies at one establishment within 90 days triggers collective consultation duties and notification to the government.

Employment Rights Act 1996, Part XI — weekly pay cap reviewed each April; collective consultation under the Trade Union and Labour Relations (Consolidation) Act 1992. Guidance from ACAS and GOV.UK.

Related terms

• TUPE
• P45
• Probation period