Redundancy arrives with a fog of numbers at the worst possible time. The entitlements are more mechanical than they feel — here is the machine.
Statutory Redundancy Pay
Requires 2+ years of service. The formula: 0.5 week’s pay per full year under age 22, 1 week per year from 22–40, 1.5 weeks per year from 41 — capped at 20 years of service and a weekly pay cap of £751 (2026/27), maximum £22,530. Your contract may promise more (enhanced redundancy); it cannot pay less.
The £30,000 Tax-Free Slice
Genuine redundancy payments — statutory and enhanced — are tax-free up to £30,000. But notice pay, holiday pay and PILON (payment in lieu of notice) are normal earnings: taxed and NI’d in full. Getting the split right on your settlement statement matters by thousands.
Notice and Consultation
- Statutory notice: 1 week per year of service, up to 12 weeks
- Consultation is mandatory; 20+ redundancies at one site triggers collective consultation of 30–45 days
- You are entitled to reasonable paid time off to job-hunt after 2 years’ service
Practical Moves
Check any settlement agreement covers the correct tax treatment (and that the employer pays for the legal advice — standard practice). Redundancy in a high-earning year? Sacrificing part of a package above £30,000 into your pension avoids tax entirely.