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Guide To Redundancy and Statutory Redundancy Pay

Our Crunch advisors are only able to answer accountancy related questions. If you have an employment question please either leave a comment below or phone the Acas Helpline on 0300 123 110.


Article updated for 2017.


Who is entitled to a Redundancy payment?


You are entitled to a payment from your employer if you are an Employee and:



  • You have a permanent (open-ended) contract and

  • You have at least 2 years continuous service with your Employer on the ‘effective date of termination’ (see below) and

  • You are made redundant.


There are a few exceptions where people are not entitled to Redundancy Pay – see the Direct Gov site here for more information.  For more information about continuous service read our new Guide here.


If you are employed on a Fixed Term Contract, with 2 years continuous service, which ends without being renewed because of a redundancy situation you may also be due a redundancy payment. See the information on this information on the Direct Gov site.


A new type of employment contract – the Employee Shareholder Contract – came to life on 1st September 2013.  Under this type of contract employees give away some of their employment rights , including the right to Statutory Redundancy Pay, in exchange for receiving shares between £2,000 – £50,000 in their company (and benefiting from tax advantages on these shares).  More details here.


Information on Dismissal by Redundancy


Redundancy is a ‘fair’ means of dismissal by your Employer if the procedures they follow and the circumstances are correct.  A Redundancy situation is applied when there is no more, or not enough, work for you and your colleagues (for example if your employer closes or relocates the business, or now needs fewer workers).  For more details about the situations in which you can be made redundant see our new Guide here.


Your employer needs to take the following steps to ensure the redundancies are ‘fair’:



  • Employees need to be informed of proposed redundancies (the Trade Union and Labour Relations Act 1992 requires employers with 20 or more staff to inform and consult relevant union or employee representatives about their proposals before they are implemented – this is called Collective Consultation).



  • Changes to Redundancy Consultation because of the Agency Workers Regulations 2011. With the introduction of the Agency Workers Regulations in 2013 the regulations were amended to change Employers’ information and consultation obligations where there is a collective redundancy consultation (for 20 or more redundancies).

    Since 2011 Employers need to provide information to trade union representatives, or other appropriate representatives, on the number of agency workers working temporarily for and under the supervision and direction of the employer and the part of the organisation where they agency workers are working and the type of work the agency workers are carrying out.



  • Your Employer must undertake Consultation, with the ‘affected employees’ (or their representatives) with a view to ‘reaching agreement’.  Individual consultation (that follows collective consultation where this is required) should take place before any redundancy dismissals are confirmed.  Consultation is not negotiation, but the communication your Employer has with you about Redundancies – it must be more than just an announcement and they should consider alternative ideas to redundancy (e.g. voluntary redundancies, reducing pay, reducing hours, job sharing etc.) and explain their decisions to you.



  • Consultation should be completed before any redundancy notices are issued.



  • Employers proposing to dismiss 20 or more employees must complete a 30-day consultation period; where a 100 or more redundancies are proposed this rises to 90 days (this will be reduced to 45 days from 6th April 2013).  If Employers fail to follow this process, employees may be entitled to a ‘protective award’.  In the long-running ‘Woolworths’ case, in May 2015 the European Court of Justice, judged that the requirement for collective consultation is triggered only when the employer proposes 20 or more redundancies at one establishment (and not across the whole of the business/across seperate premises).



  • Your Employer must select those who are at risk of redundancy in a fair way (this is called defining the redundancy ‘pool’ – for example an appropriate pool might be the employees who carry out the kind of work which is reducing or who work at the side that is proposed for closure) – the factors they use in deciding who stays and who goes must be fair and not discriminatory.  The selection criteria should include skills, qualifications, training, experience, attendance, time-keeping, disciplinary records, future potential, flexibility and performance.  You can read about how disabled staff should be treated during a Redundancy exercise here.  Recruitment style assessment centres may be appropriate in some large-scale redundancy exercises. Input from Manager’s who have experience of working with the employees should be included as one of the factors as should appraisals.




  • They must pay you your Statutory Redundancy Pay entitlement.


Without all these steps being taken your Redundancy could be seen as an Unfair Dismissal by an Employment Tribunal.


For more information about Dismissals to bring in a new contract with new terms and conditions see our article here.


Other useful information about Redundancies



  • You will not be due a redundancy payment if you resign.

  • If your employer needs people to volunteer to take redundancy and you volunteer and are accepted you will qualify for a redundancy payment and appropriate notice period.  (Your Employer is likely to reserve the right NOT to accept all voluntary redundancy applications).

  • If you have been given notice of redundancy you can ask to leave earlier.  If your employer agrees to this you will still qualify for a redundancy payment.

  • If your employer offers you a new job that is a reasonable alternative to your old job you can accept the new job on a 4 week trial period.  If at the end of the 4 weeks you do not want to stay in the new job you will still qualify for a redundancy payment (if you stay in the new job after these 4 weeks you will be considered to have accepted the new job, if you don’t say differently, and will forfeit your redundancy payment).

  • If you are offered a new job that is not considered a reasonable alternative to your old job (e.g. worse conditions of employment, different responsibilities or location) you can turn the new job down before the end of the trial period and take your redundancy payment.

  • If you refuse an offer of a new job that is considered a reasonable alternative without a good reason you may not be entitled to a redundancy payment.

  • See our new article here with more details about ‘suitable alternative employment’ – what is it, when does it apply, do you have to take it…

  • If a redundancy situation arises while you are away on maternity or adoption leave (and from April 2011) on Additional Paternity Leave,  you must be offered a suitable alternative vacancy if one is available.  A European Court of Justice case in September 2013 (Halliday v Creation Consumer Finance Ltd) found that an employee absent on parental leave could be made redundant, as long as the reason for the dismissal was not the parental leave (this will apply to maternity leave and paternity leave too).

  • If you are off work due to sickness your Employer should be in regular contact with you if there is a redundancy situation to explain the situation and keep you informed of opportunities and news.

  • When you receive Statutory Redundancy Pay (SRP) this does not affect any entitlement you have to claim Job Seekers Allowance or other benefits.

  • Your employer may offer enhanced redundancy pay and notice periods in your contract.

  • You have a legal right to take time off to look for work if you are declared redundant (and have at least 2 years service).

  • The first £30,000 of redundancy pay is tax free and NIC free at the moment.  Payments over £30,000 are currently taxable and it is anticipated that from April 2018 employers NIC contributions will also need to be paid on payments over £30,000 (but not employee NIC’s); but the announcement of the June 2017 General Election may delay this timetable.

  • From April 2016 public bodies can recover redundancy and other exit payments from highly paid employees who return to work in the same part of the public sector within a short period of leaving.  The measures will apply to anyone earning over £80,000 who returns to the public sector within 12 months.

  • The Government has also started consulting, at the end of July 2015, on banning 6-figure ‘golden’ goodbyes to public sector workers and capping payments at £95,000. Consultation ended on 27th August 2015 and in November 2015 draft Public Sector Exit Payment Regulations 2016 were published outlining the Government’s proposal.  The reforms will be implemented probably by summer 2017 in England (Scotland, Wales and Northern Ireland will decide whether to apply these changes) and will mean that the £95,000 threshold applies to the total amount of pay received by an individual, for loss of employment, and includes redundancy payments, voluntary exit payments and “any other payment made as a consequence of, in relation to, or conditional upon, loss of employment whether under a contract of employment or otherwise”, which would include Pay in Lieu of Notice but would exclude any outstanding holiday pay due.  In October 2016 the Government confirmed the ‘exit payment framework’ would include:

    • A maximum of £80,000 salary would be used to base the exit payment on

    • A maximum of 3 weeks per year of service that could be paid

    • A maximum of 15 months salary that can be paid as a redundancy payment.


    More information to follow as it becomes clear!


  • If you do not automatically receive SRP, when you are entitled to it, you can make a claim to an Employment Tribunal.

  • You can see details about Redundancy and Insolvency from the Government’s Insolvency service here.


Short-time and temporary layoff


Statutory redundancy pay can be claimed from your employer if you have been temporarily laid off for either more than four weeks in a row or more than six non-consecutive weeks in a 13 week period.


You should write to your employer telling them you intend to claim statutory redundancy pay. This must be done within four weeks of your last non-working day.


You can read more details in our new Guide to short-time working and lay-off’s here.


Notice of Redundancy


The minimum notice of redundancy your Employer must give you is 1 week for each completed year of service you have with them (up to a maximum of 12 weeks).  You should be paid for your notice period or receive pay in lieu of this time.


For details of your pay rights during your notice period go to this link.


The effective date of termination


The effective date of termination is defined as:



  • where the contract is terminated by notice, the date on which that notice expires (including where notice is given but the employee is not required to work their notice period but remain at home, which is referred to as ‘garden leave).

  • where the contract is terminated without notice (including where a payment in lieu of notice is paid) – the date on which the termination takes place (their last day at work).


In some circumstances though the effective date of termination can be extend to ensure that an employee is not deprived of their statutory rights by dismissing them without notice before the reach the qualifying period to present a claim for unfair dismissal or entitlement to a redundancy payment.  For example, if an employee is employed for 23 months and then is dismissed without notice a couple of days before completing their two-year period of employment, the date of termination can be extended to account for their statutory entitlement to 1 weeks notice period (so they would be entitled to claim unfair dismissal or a redundancy payment).


Statutory Redundancy Pay (SRP)


This is calculated depending on your age, length of continuous service with your employer and your weekly earnings.



  • You receive half a weeks pay for each completed year of service up to the age of 21

  • You receive 1 weeks pay for each completed year of service between ages 22 and 40

  • You receive 1 and a half weeks pay for each completed year of service over the age of 41.

  • The maximum number of year’s service that can be counted is 20.

  • SRP is based on your ‘weekly’ pay, under your contract of employment at the time of redundancy – therefore if you currently work part-time (but have previously worked full-time and your current part-time hours are on a permanent contractual basis and are your normal working hours now) your Employer is only obliged to calculate your redundancy payment on your reduced part-time salary.

  • There is also a limit on what can be counted as a weeks pay – £479 per week is the maximum from 6th April 2016, increasing to £489 from 6th April 2017.

  • The total maximum statutory redundancy pay you can receive is £14,370 from 6th April 2016, rising to £14,670 from 6th April 2017.

  • SRP is not currently taxable.

  • To calculate a week’s pay (which you need to do for redundancy payments, holiday pay and pay during notice periods) look at this link.


More details on a Week’s Pay – how much pay should you receive?



  • A week’s pay is calculated in accordance with the definition of a working week in the Employment Rights Act 1996 which says that a ‘working week’ includes overtime only if this is contractual, i.e. it is specified in your employment contract.

  • If your overtime is not specified in the contract it is not counted. However, in 2013, there are signs that this may change – see more details in our new Guide ‘How to Avoid Confusion When Calculating Holiday Pay

  • For example, if you are contracted to work 20 hours per week but regularly work 40 hours per week with overtime, but this overtime is not contractual, then your payment for a weeks holiday entitlement will be based on 20 hours.

  • If you work with fixed hours and pay then the amount due for a weeks pay is the normal pay you receive for a weeks work.

  • If you work with variable hours and pay (e.g. bonus, commission) then a weeks pay equals the average hourly rate over the preceeding 12 weeks of pay multiplied by your normal working hours.

  • If you work shifts a weeks pay equals your average weekly hours over the preceeding 12 weeks of pay at your average hourly rate.

  • If you work with no normal working hours a weeks pay is the average pay you received over the preceeding 12 weeks (that were paid).

  • A week’s pay will generally not include benefits in kind – pension, car, health cover.  Bonuses, if they are discretionary, may be excluded too.  Any salary that is sacrificed through a ‘salary sacrifice’ scheme may also not be included.  Annual contractual bonuses may be included on a pro-rata basis if they are possible to quantify at the point of calculation.


Direct.Gov SRP Calculator


NB Your employer may offer more generous redundancy payments in your contract (but SRP will be included within this higher payment).


Our Crunch advisors are only able to answer accountancy related questions. If you have an employment question please either leave a comment below or phone the Acas Helpline on 0300 123 110.


If you are an Employer and need ongoing professional help with any staff/freelance issues then talk to Lesley at The HR Kiosk  – a Human Resources Consultancy for small businesses – our fees are low to reflect the pressures on small businesses and you can hire us for as much time as you need.


Please note that the advice given on this website and by our Advisors is guidance only and cannot be taken as an authoritative or current interpretation of the law. It can also not be seen as specific advice for individual cases. Please also note that there are differences in legislation in Northern Ireland.


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