Understanding Redundancy Pay
Understanding Redundancy Pay
Redundancy pay is a financial payment made to employees who lose their job because their role is no longer needed. This might happen if a business closes, restructures, or reduces its workforce. Redundancy pay is designed to provide some financial security while you look for new work, recognising the impact of losing your job through no fault of your own.
Who Is Eligible for Statutory Redundancy Pay?
Most employees in the UK are entitled to statutory redundancy pay if they meet certain criteria. You must:
- Be classed as an employee (not self-employed or a contractor)
- Have worked continuously for your employer for at least two years
- Be dismissed specifically because of redundancy (not for another reason, such as misconduct)
There are some exceptions. For example, you may not qualify if your employer offers to keep you on or finds you suitable alternative work and you unreasonably refuse it. Certain categories of workers, such as members of the armed forces or police, may also be excluded.
The amount of statutory redundancy pay you receive depends on your age, weekly pay (capped by law), and the number of years you have worked for your employer. For the most up-to-date figures and detailed eligibility information, visit the official government guidance on statutory redundancy pay.
Statutory vs. Contractual Redundancy Pay
It’s important to understand the difference between statutory and contractual redundancy pay:
- Statutory redundancy pay is the minimum amount set by law, which all eligible employees must receive.
- Contractual redundancy pay is any additional amount your employer agrees to pay, usually set out in your employment contract or company policies. Some employers offer more generous redundancy packages, but they cannot offer less than the statutory minimum.
Always check your contract and speak to your employer or HR department to find out what you are entitled to.
Redundancy Pay in the Wider Legal Context
Redundancy is just one way employment can end. Understanding your rights under UK redundancy law is crucial, as it protects you during a difficult time and ensures you receive what you are owed. For a broader overview of redundancy, including your rights and how redundancy fits within employment law, see Understanding Redundancy in UK Law: Your Rights Explained.
You may also find it helpful to learn about the relationship between redundancy and other forms of dismissal. For further reading, explore Redundancy and Dismissal to understand how redundancy differs from other ways your employment might end.
If you have questions about your specific situation or believe your redundancy pay is incorrect, consider seeking advice from an employment law specialist or your local Citizens Advice Bureau.
Who Is Eligible for Redundancy Pay?
To qualify for statutory redundancy pay in the UK, you must meet certain criteria set out in the Employment Rights Act 1996. Understanding these requirements is essential to know whether you are entitled to redundancy pay and how much you might receive.
Minimum Employment Length
You are only eligible for redundancy pay if you have worked for your employer continuously for at least two years. “Continuous service” means there have been no significant breaks in your employment. Short breaks for holidays, sickness, or parental leave usually do not interrupt continuous service, but starting a new contract with a different employer or long gaps can.
Example:
If you started working for your employer on 1 July 2022 and are made redundant on or after 1 July 2024, you would meet the two-year requirement.
Age and Redundancy Pay
Your age at the time of redundancy affects the amount of pay you receive. The calculation is as follows:
- Half a week’s pay for each full year you were under 22
- One week’s pay for each full year you were aged 22 to 40
- One and a half week’s pay for each full year you were aged 41 or older
The weekly pay used for the calculation is capped by law and may change each year.
Who Is Excluded from Redundancy Pay?
Not all employees are eligible for redundancy pay, even if they have two years’ service. Common exclusions include:
- Fixed-term contracts: If your fixed-term contract ends naturally (i.e., it expires and isn’t renewed), you are generally not entitled to redundancy pay unless your contract specifically says otherwise.
- Certain professions: Members of the armed forces, police, or civil servants may have different rules.
- Dismissal for misconduct: If you are dismissed for gross misconduct, you are not entitled to redundancy pay.
- Self-employed and some agency workers: If you are not classed as an employee, you do not qualify.
How to Check Your Eligibility
To check if you qualify for redundancy pay:
- Review your employment contract and any correspondence from your employer about your employment status.
- Check your length of service – look at your official start date and any breaks in employment.
- Consider your employment type – ensure you are classed as an employee, not self-employed or a contractor.
- Understand the reason for your contract ending – redundancy must be the reason, not dismissal for another cause or a fixed-term contract ending as planned.
If you are unsure about your rights or how redundancy applies to your situation, it may help to compare your situation with other forms of dismissal. You can learn more about the differences and your rights by visiting our section on Special Considerations: Redundancy and Fair Dismissal.
For the most accurate and up-to-date details, always refer to the official legislation or seek professional advice.
How Redundancy Pay Is Calculated
When you are made redundant in the UK, the amount of statutory redundancy pay you are entitled to depends on three key factors: your age, your length of continuous service with your employer, and your weekly pay (before tax). Here’s how the calculation works:
The Statutory Redundancy Pay Formula
The law sets out a clear formula for calculating redundancy pay, based on your age at the time of redundancy and your years of continuous employment with the same employer. The calculation is as follows:
- For each full year of service when you were under 22:
You get half a week’s pay for each year. - For each full year of service when you were aged 22 to 40:
You get one week’s pay for each year. - For each full year of service when you were 41 or older:
You get one and a half week’s pay for each year.
Your total redundancy pay is the sum of these amounts, up to a maximum of 20 years’ service.
Maximum Weekly Pay Limits
There is a legal cap on the amount of weekly pay that can be used in the calculation. As of April 2024, the maximum weekly pay is £669. Even if your actual weekly pay is higher, only £669 per week will be counted for statutory redundancy purposes. The government reviews this limit annually, so it’s wise to check the latest figures.
Example Calculation
Suppose you are 45 years old, have worked for your employer for 15 years, and your weekly pay is £700.
- Years worked aged under 22: 2 years × 0.5 week = 1 week’s pay
- Years worked aged 22 to 40: 8 years × 1 week = 8 weeks’ pay
- Years worked aged 41 and over: 5 years × 1.5 weeks = 7.5 weeks’ pay
Total: 1 + 8 + 7.5 = 16.5 weeks’ pay
Since your weekly pay exceeds the statutory cap, your redundancy pay will be based on £669 per week:
- 16.5 weeks × £669 = £11,038.50
Special Cases: NHS and Other Sectors
Some sectors, such as the NHS, have their own redundancy arrangements that may be more generous than the statutory minimum. If you work in the NHS, you should refer to the NHS Redundancy Calculation: Maximize Your Payout Guide for a step-by-step breakdown. You can also find official details on NHS redundancy arrangements | NHS Employers.
Practical Tips and Further Help
- Check your contract: Your employer may offer a more generous redundancy package than the legal minimum.
- Use official tools: To work out your exact entitlement, use the government’s Calculate your statutory redundancy pay – GOV.UK calculator.
- Know your rights: Redundancy pay is only one part of the process. For details on notice periods, termination rights, and fair dismissal, see Special Considerations: Redundancy and Fair Dismissal.
Understanding how redundancy pay is calculated can help you plan your next steps and ensure you receive everything you are entitled to under UK law.
When Will You Receive Your Redundancy Pay?
When Will You Receive Your Redundancy Pay?
Knowing when to expect your redundancy pay can help you plan your finances during a challenging time. In the UK, the law sets clear rules on when redundancy payments should be made, how they are paid, and what to do if there are any delays.
Typical Timeline for Payment
By law, your employer must pay your statutory redundancy pay no later than the date your employment ends, or shortly afterwards. Most people receive their redundancy pay on their final working day, along with their last salary payment. However, employers can pay it within a reasonable period after your employment ends – typically within a few days or weeks.
If you are entitled to contractual redundancy pay (an amount above the statutory minimum, as set out in your employment contract), the timing should also be specified in your contract. If it isn’t, the statutory timeline still applies.
What the Law Says
Under the Employment Rights Act 1996, statutory redundancy pay must be paid as soon as possible after your employment ends. While the law doesn’t set a strict number of days, "as soon as reasonably practicable" is generally interpreted as payment on or very shortly after your termination date.
How Redundancy Pay Is Usually Paid
Redundancy pay is usually made as a lump sum. Most employers include it in your final salary payment, but it can also be paid as a separate bank transfer. You should receive a written statement from your employer showing how your redundancy pay was calculated.
If you have any questions about your final pay, including redundancy, it’s a good idea to check your payslip and any accompanying documents. This will help you understand how your payment has been worked out and spot any errors.
If Your Redundancy Pay Is Delayed
If your employer does not pay your redundancy pay on time, you have the right to take action. Start by contacting your employer in writing to request payment. If this does not resolve the issue, you can make a claim to an employment tribunal. You must do this within six months (minus one day) from the date your employment ended.
Delays can sometimes occur if your employer is in financial difficulty or disputes your entitlement. If your employer has gone insolvent, you may be able to claim your redundancy pay from the government.
For more on your rights when your employment ends – and how redundancy compares to other forms of dismissal – see Special Considerations: Redundancy and Fair Dismissal.
Understanding when and how you’ll receive your redundancy pay can help you take control of your next steps, whether you’re moving on to a new job or considering your options. If you have concerns, don’t hesitate to seek advice or support.
What To Do If Your Employer Does Not Pay On Time
If your employer does not pay your redundancy pay on time, it’s important to act quickly to protect your rights. By law, if you qualify for statutory redundancy pay, your employer must pay you promptly – usually on or shortly after your final working day. Here’s what you should do if your payment is late or missing:
1. Check Your Entitlement and Payment Timeline
First, confirm that you meet the eligibility criteria for redundancy pay under the Employment Rights Act 1996. If you’ve worked continuously for your employer for at least two years, you are generally entitled to statutory redundancy pay. Double-check your final payslip and any redundancy documents to make sure payment hasn’t been processed.
2. Raise the Issue With Your Employer
If you haven’t received your redundancy pay, contact your employer in writing as soon as possible. Clearly state that your redundancy payment is overdue and ask for a payment date. Keep records of all correspondence. Sometimes, delays are due to administrative errors that can be resolved quickly through direct communication.
3. Escalate the Matter if Payment Remains Outstanding
If your employer still does not pay, you have several options:
- Contact ACAS: The Advisory, Conciliation and Arbitration Service (ACAS) offers free advice and can help mediate disputes between employees and employers. Their official guidance on redundancy is a good starting point for understanding your options and rights. Redundancy | Acas
- Submit a Formal Grievance: If informal approaches fail, follow your employer’s grievance procedure. This step is often required before taking legal action.
- Employment Tribunal Claim: If you don’t receive payment within three months (less one day) from the date your employment ended, you can make a claim to an employment tribunal. This is a legal process where a judge will decide if you are owed redundancy pay.
For more detailed guidance on challenging unfair treatment or securing your redundancy entitlements, see our guide on How to Win Your Redundancy Case.
4. Additional Support and Legal Protections
If you believe your broader payment rights are being violated, including issues beyond redundancy pay, you can explore your options in our overview of Payment Rights in the UK: Legal Overview.
5. Ensuring Fair Treatment During Redundancy
It’s also important to ensure you’re being treated fairly throughout the redundancy process. For key questions to ask during consultation and tips on protecting your rights, visit Key Redundancy Consultation Questions for Fair Treatment.
Remember, acting promptly improves your chances of recovering what you’re owed. If you’re unsure about the process or need additional support, organisations like ACAS or a local Citizens Advice Bureau can help you navigate your next steps.
