If you’re made redundant and have worked for your employer for two or more years, you’ll be entitled to a statutory redundancy payment. Some employers pay more than the statutory minimum, either because they have a more generous contractual scheme or offer enhanced terms in return for voluntary redundancy in order to avoid the compulsory redundancy dismissal process.

Statutory redundancy pay

This is the legal minimum that your employer has to pay if you’re dismissed because you’re made redundant. If you’re dismissed for some other reason, such as misconduct, you won’t have the right to redundancy pay. Statutory redundancy pay is calculated on the basis of your age, length of service and weekly pay. A week’s pay is currently capped at £700 (as of 06 April 2024) but this amount is reviewed annually and usually increases each April. If you’ve been continuously employed for two or more years you’re entitled to:

• Half a week's pay for each complete year of service that you were aged under 22
• A full week's pay for each complete year of service that you were aged between 22 and 40
• A week and a half's pay for each year that you were aged 41 or older

The maximum number of years you can claim for is 20, so the maximum statutory redundancy pay you can receive is £19,920.

Contractual redundancy pay

It’s important to check your contract, staff handbook, intranet and company policies to see whether you’re entitled to more than the statutory minimum. In some cases, the statutory amount will be counted towards the contractual amount. It’s important to check what your documentation says about this.

If you’re dismissed through redundancy, your employer has to give you notice to terminate your employment.

The amount of notice you’re entitled to should be set out in your employment contract, statement of employment terms or appointment letter. The amount should be no less than the statutory minimum. If the contract provides for shorter notice than the statutory minimum, statute overrides the contract and the statutory notice should be given.

The statutory minimum notice your employer must give you is one week for each complete year you've worked for them, up to a maximum of 12 weeks’ notice. Your contract may have a longer notice period written into it.

Payment in lieu of notice

Ordinarily, you will be expected to work during your period of notice and remain subject to the terms of your employment contract until the date the notice expires. Some contracts contain a clause expressly giving your employer the right to make a payment in lieu of notice (‘Pilon’ for short) instead. If there isn’t an express term in your contract, your employer may decide, without your agreement, to end your employment earlier and pay you in lieu of the remaining notice. Or it may come to an agreement with you, for example, because you have asked to leave earlier, to pay you in lieu of notice. If you want to leave before your notice period has expired, but your employer is not happy to let you go sooner, they may give you the option of leaving – but they have no obligation to pay you for the notice that you do not want to work.

Specific tax rules apply to redundancy payments (and other contractual payments) and the first £30,000 may be tax-free. It’s always sensible to get tax advice from a professional if you find yourself in this situation.

Before starting any legal claim, it’s a good idea to seek advice from an employment lawyer or specialist adviser. For expert employment law advice contact our legal advice service today.