UK Redundancy Rights Guide 2025: What You Are Entitled To

Being told your role is at risk of redundancy is stressful regardless of how well you know the process. Most employees focus on the money immediately, which is understandable, but your rights during a redundancy go well beyond just the lump sum at the end. Understanding what your employer is legally required to do, and what you are entitled to receive, puts you in a much stronger position whether your redundancy turns out to be genuine or whether there are grounds to challenge it.

This guide covers the full picture of UK redundancy rights for 2025, including statutory pay calculations, notice entitlements, consultation requirements, and how tax rules apply to redundancy payments. Use our redundancy pay calculator to get an instant estimate of your statutory entitlement based on your age, length of service and weekly pay.

What counts as a genuine redundancy

Redundancy has a specific legal definition in UK employment law. It occurs when an employer needs to reduce its workforce because the business or a particular workplace is closing, or because the requirement for employees to do a certain kind of work has reduced or ceased. Redundancy is not a catch-all reason an employer can use to remove someone they find difficult or want rid of. If the reality is that your role is being filled by someone else or the employer simply wants to replace you, that is dismissal and not redundancy.

The distinction matters enormously because a genuine redundancy entitles you to statutory redundancy pay and a fair process. An unfair redundancy process, or one that is actually a disguised dismissal, may entitle you to additional compensation through an employment tribunal. Employees with two or more years of continuous service have the right not to be unfairly dismissed, and this right applies to redundancies that are carried out improperly as much as it does to straightforward unfair dismissal cases.

Your right to be consulted

Consultation is one of the most important and most frequently misunderstood redundancy rights. Your employer cannot simply hand you a redundancy notice and show you the door. They are required to consult with you meaningfully before any decision is final, which means genuine two-way discussion about the reasons for redundancy, ways to avoid it, and how the impact on affected employees can be reduced.

For large-scale redundancies affecting 20 or more employees at one establishment within a 90-day period, collective consultation rules apply. The employer must consult with employee representatives for a minimum of 30 days before any dismissals take effect if between 20 and 99 employees are affected, and 45 days for 100 or more. They must also notify the Secretary of State via an HR1 form. Failure to follow collective consultation rules can result in a protective award of up to 90 days pay per affected employee.

For individual redundancies, there is no statutory minimum consultation period, but an adequate and genuine process is still required. A single brief meeting followed immediately by a notice letter rarely meets that standard. Courts and tribunals look at whether the employee had a real opportunity to put forward alternatives, whether the selection criteria were fair and applied consistently, and whether the employer genuinely considered the responses given in consultation.

How statutory redundancy pay is calculated

Statutory redundancy pay is calculated using three factors: your age, your length of continuous service with the employer, and your weekly pay. The formula gives you a number of weeks pay based on your age bracket for each year of service, capped at 20 years total service and a weekly pay cap that increases each April. For redundancies taking effect in 2025/26, the weekly pay cap is £700.

The maximum statutory redundancy payment in 2025/26 is therefore £21,000, which is the maximum 30 weeks multiplied by the £700 weekly pay cap. Many employers pay enhanced redundancy above the statutory minimum, and your employment contract or company policy will specify whether that applies. Always check your contract before assuming statutory is all you will receive.

Your weekly pay for redundancy purposes is your average weekly earnings over the 12 weeks before the redundancy notice date if you have variable pay, or simply your contractual weekly gross pay if your pay is fixed. Overtime that you are contractually guaranteed is included, but voluntary overtime that is not guaranteed is usually excluded from the calculation.

Notice pay and notice periods

In addition to redundancy pay, you are entitled to be paid for your notice period. Your notice period is the longer of your contractual notice and your statutory minimum notice. Statutory minimum notice in the UK is one week for each year of continuous employment up to a maximum of twelve weeks, starting from the completion of one month of service.

Your employer can either ask you to work your notice period, put you on gardening leave where you stay at home on full pay, or make a payment in lieu of notice (PILON). All three result in you receiving pay for the notice period. If you are put on gardening leave, you remain an employee throughout and continue to accrue holiday entitlement. Our notice period calculator helps you work out exactly how long your statutory and contractual notice should be.

If your employer fails to give you the correct notice or pay in lieu, you may have a claim for wrongful dismissal in addition to any unfair dismissal claim. These are separate legal claims with different remedies, and many redundancy situations involve both.

Tax treatment of redundancy payments

The tax treatment of your redundancy package depends on what it consists of. Statutory redundancy pay is always tax free. For the overall termination payment, the first £30,000 is exempt from income tax and National Insurance. This means if your total redundancy package including enhanced pay, notice payments and any ex-gratia amounts totals less than £30,000, you pay no tax at all on the redundancy portion.

Payments in lieu of notice that are contractual, meaning your contract entitles the employer to make them, are treated as earnings and taxed in the normal way regardless of the £30,000 exemption. Only non-contractual termination payments benefit from the exemption. If your employment contract contains a PILON clause, your notice pay will be subject to income tax and NI. If there is no such clause, the position is more nuanced and has changed under rules introduced in 2018.

Any unused holiday pay included in your final settlement is earnings and fully taxable. Benefits in kind received as part of a settlement may also be taxable depending on their nature. If your total package is large or complex, speaking to a tax adviser before signing a settlement agreement is worthwhile.

Voluntary redundancy and your rights

If your employer offers voluntary redundancy, you retain broadly the same rights as someone selected for compulsory redundancy. You should receive at least the statutory minimum redundancy pay and full notice entitlement, and any voluntary redundancy package must still be genuinely voluntary without pressure or coercion. Accepting voluntary redundancy does not typically affect your right to claim jobseeker's allowance, though HMRC will look at whether you left voluntarily when assessing benefits entitlement.

One important consideration with voluntary redundancy is the impact on any ongoing legal claims. If you are considering challenging aspects of your employment such as discrimination, unpaid wages, or constructive dismissal, accepting a voluntary redundancy package may affect your position. Settlement agreements offered alongside voluntary redundancy usually require you to waive claims in exchange for enhanced pay, so taking independent legal advice before signing is strongly recommended.

What happens to holiday entitlement

Any accrued but untaken annual leave must be paid out on termination. This applies regardless of whether the termination is voluntary or compulsory. Your statutory holiday entitlement of 28 days per year (including bank holidays) accrues on a pro-rata basis throughout the year. If you are made redundant in August having taken only ten days of holiday, your employer owes you payment for the remaining accrued days up to the termination date. Our holiday entitlement calculator can help you verify exactly how many days you have accrued at any point in the holiday year.

Employers cannot withhold holiday pay as a penalty for accepting redundancy, and any clause in a contract purporting to do so is unenforceable. If you believe you have been underpaid on termination, including for accrued holiday, you can raise a claim with ACAS before proceeding to an employment tribunal. The time limit for most employment claims is three months less one day from the date of dismissal, so acting promptly matters.