Know Your Rights: Statutory Redundancy Pay

Find out if you're getting what you're owed when being made redundant.

Reviewed by Hayley Ramsey

Employee walking out with their statutory redundancy pay

Being made redundant can be one of the most stressful moments in life. In a world that is rapidly changing and learning to cope with many different economic shocks at once, redundancy is a risk that many of us might have to think about and prepare for. The truth is that anyone — whether they are good at their job or struggling, or whether they have been in their job five months or five years — can be put “at risk”.

Knowing your rights if you are put at risk of redundancy can be the most important step in preparing yourself should this situation arise. This article takes you through your rights if you are made redundant in the UK, as well as what pay you are entitled to, what to do if you are made redundant, and how notice periods work.

What to do if you get made redundant

If you are made redundant, the first thing to do is not to panic. The situation might be shocking, but it’s not unusual. You will not be the only one going through something like this, and your employer will be there to support you through the process.

Seeing as redundancy in the UK is subject to tight employment law and consequently takes a long time to take effect, you will likely know that you are at risk a long time before a decision is made (a minimum of 30 days). You should use this time to prepare your résumé or CV, and perhaps even quietly engage with other employers or reach out to your network to see what other jobs are available. Read up on your statutory rights (which we cover in this article) so you know what to expect in the redundancy meetings and also so you can question your employer if they did anything they were not supposed to do.

Once you have been made redundant, it’s vital that you keep busy. If your job search is taking a long time then make a routine, where you can stay occupied with applying for roles, household chores, and scheduled time to relax — basically, anything and everything you can do to take your mind off what is happening.

What are your rights?

The UK government offers those who have been made redundant or are at risk of redundancy several key rights. These are:

  • The right to statutory redundancy pay
  • The right to your notice period
  • The right to fair selection and a consultation period with your employer
  • The right to move to a different job in the same company, if a suitable role is available
  • The right for time off to find a new job

If you are not afforded these rights, then you may be eligible to take your employer to an employment tribunal for unfair dismissal.

Fair selection principally relates to being selected for redundancy based on discriminatory factors, such as age, gender, disability, or if you are pregnant. You must also be selected for redundancy in a fair way, such as according to pre-set and consistent criteria (although the employer can create these themselves and it might vary from role to role). In consultation meetings, you have the right to be accompanied by an employee representative.

Employers can offer you alternative employment, though if you unreasonably refuse this employment, it might impact your redundancy pay. The definition of “unreasonable refusal” is open to interpretation, but in general the role offered to you should be of the same wage you are on, make use of the same skills, and no less senior. If you have been made redundant, and chose to work your notice, then you are allowed to take time off to look for work, this being paid at least 40% of your weekly basic pay.

How much are you entitled to?

Employers are obliged to pay you at least statutory redundancy pay, but some companies offer enhanced pay. It’s important to check with your employer to see what you are entitled to.

You will be entitled to redundancy pay if you are an employee (not a contractor or similar) and if you have been employed in your company for two years or more. Upon termination of employment, your lump sum final payment is usually made up of several factors:

  • Statutory redundancy pay
  • Holiday pay (holiday not taken but accrued)
  • Unpaid wages including notice period
  • Company benefits accrued but not paid, such as bonuses

All of the above is taxable, except from statutory redundancy payments under £30,000.

Statutory redundancy payments are calculated according to your age during your service with your employer, and your length of service. It’s processed at half a week’s pay for every year you were under 22 years old, 1 week’s pay for each year you were 22 or over (but under 41), and one and a half week’s pay for each year you were 41 or older. Length of service in this respect is capped at 20 years.

Weekly pay is defined as the average amount you earned in the 12 weeks before the day you were officially informed you would be made redundant. An example of how to calculate this is included below.

How to calculate your redundancy pay

The UK government website offers a useful online calculator that allows you to work out how much statutory redundancy pay you might be entitled to.

Using this calculator, enter the date you were made redundant, followed by your age on the date you were made redundant. Next, enter the number of years worked with your employer. Here, only full years count, so if you were in service with your employer for 8 years and 11 months, you would enter 8 years only. The next step is to enter your gross weekly pay (before tax and other deductions).

Based on this calculation, a 29-year-old with 8 years’ service, earning a weekly salary of £500, would be entitled to a tax-free statutory redundancy payment of £3,750. This payment would not include notice pay, benefits, or holiday pay.

Do you have to work your notice?

You have a legal right to a notice period. Statutory redundancy notice periods are at least 1 weeks’ notice if you are employed between 1 month and 2 years, 1 weeks’ notice for each year if employed between 2 and 12 years, and 12 weeks’ notice if employed for 12 years or more.

If you are made redundant, you can work your notice period and get paid for this when you leave work. If you are contractually entitled to “pay in lieu of notice” (PILON) (check your contract on whether you are or not), then you have the option of leaving immediately and being paid out your notice period instead. PILON can be offered even if you are not contractually entitled to it. If your employer offers you to work your notice, you can refuse this and receive PILON instead.

Final thoughts

Being made redundant might seem like the end of the world, but for many people, it can open the start of a new chapter in your life. Knowing your rights and statutory payments if you are made redundant is a great first step in mentally preparing yourself for what happens if you lose your job in this way.

Don’t be afraid to question your employer if you think your redundancy process isn’t fair, and if this seems to be the case, then appeal the decision if it’s confirmed. The Advisory, Consultation and Arbitration Service (ACAS) is an independent organization that can guide you through the rights and wrongs of redundancy processes, as well as all other areas of employment law. If you think something isn’t right, log it with ACAS and, once you have appealed, they can help you in preparing a tribunal claim if this is what you want to do.

Have you been made redundant? Did you find the process difficult? Let us know in the comments below!