Redundancy: Know Your Rights and Next Steps

Your Legal Rights When Made Redundant

Redundancy is legally valid only if the role itself is no longer needed — not just the person. You have the right to: a fair selection process, to be consulted individually (and collectively if 20+ redundancies), to appeal the decision, to reasonable paid time off to look for a new job, and to be offered any suitable alternative vacancies before being made redundant. If your employer does not follow a fair process, you may have grounds for unfair dismissal regardless of the redundancy being genuine.

"Redundancy is legally valid only if the role itself is no longer needed — not just the person"

Statutory Redundancy Pay

Statutory Redundancy Pay (SRP) depends on your age, weekly pay, and years of service. Half a week's pay for each full year under age 22. One week's pay for each full year between 22 and 40. One and a half week's pay for each full year aged 41 or over. Weekly pay is capped at £643 (2025/26). Maximum SRP is £19,290. You must have at least 2 years of continuous employment to qualify. Check your contract — many employers offer enhanced redundancy above the statutory minimum.

Tax on Redundancy Pay

The first £30,000 of redundancy pay is completely tax-free — this includes both statutory and enhanced payments. Above £30,000, the excess is taxed as income in the year you receive it. Notice pay is always taxed as normal employment income, even if paid as a lump sum (PILON — payment in lieu of notice). Benefits and bonuses paid alongside redundancy may also be taxable. If your redundancy payment pushes you into a higher tax band, consider making a pension contribution to reduce your taxable income.

Negotiating Your Package

The statutory minimum is a floor, not a ceiling. If your employer wants a quick, clean exit, there is often room to negotiate. Consider asking for: enhanced redundancy pay above statutory, extended notice period or PILON, retained employee benefits for a period, an agreed reference, outplacement support, and continuation of share options or bonus entitlements. Get any agreement in writing before signing a Settlement Agreement. A solicitor must advise you on a Settlement Agreement — your employer should pay their fees.

"If your employer wants a quick, clean exit, there is often room to negotiate"

What to Do With the Lump Sum

Resist the urge to immediately invest or spend a redundancy lump sum. First: ensure you have 3–6 months of expenses in an easy-access savings account as an emergency buffer. Second: if you have expensive debt, clear it. Third: use your ISA allowance to shelter a portion from future tax. Fourth: consider a pension contribution — the first £30,000 is tax-free, so contributing some to a pension from the taxable portion saves income tax and NI. Do not make irreversible financial decisions while stressed.

Benefits You Can Claim

If you are out of work after redundancy, claim New Style Jobseeker's Allowance (JSA) immediately — it is a NI-based benefit (not means-tested) worth £90.50/week for up to 6 months. You can claim this even if you have savings or a partner who works. If your income or savings are low, you may also qualify for Universal Credit. Do not delay claiming — JSA cannot be backdated. Redundancy pay does not affect New Style JSA but may affect Universal Credit.

Protecting Your Pension

When leaving an employer, get your pension options in writing. You can: leave the pension with the old provider (it continues to grow), transfer it to a new employer's scheme, or transfer to a personal pension or SIPP. Do not cash in a pension early — tax charges are heavy. For defined benefit (final salary) pensions, get independent financial advice before transferring — these are often extremely valuable and difficult to replicate. Trace any previous employer pensions at gov.uk/find-pension-contact-details.

"When leaving an employer, get your pension options in writing"

Getting Back on Your Feet

Update your CV and LinkedIn immediately while your achievements are fresh. Reach out to your network — most jobs are found through people, not job boards. Consider whether redundancy is an opportunity to change direction, go self-employed, or retrain. The government's Skills Bootcamps offer free or subsidised training in tech, engineering, and other sectors. If you are starting a business, the New Enterprise Allowance (if available) provides mentoring and financial support. Most people who are made redundant find new work within 3–6 months.