Do I have to pay redundancy?

Section 135 of the Employment Rights Act 1996 gives the right to a redundancy payment to an employee who is dismissed by reason of redundancy, or laid off or kept on short-time working for long enough. Under section 155 of the Employment Rights Act 1996, they must have at least two years' continuous employment.

Redundancy has a specific meaning (Employment Rights Act 1996 s 139). It covers closing the business, closing the employee's workplace, or needing fewer people to do work of a particular kind. If the job still exists and you hire someone else to do it, it isn't a genuine redundancy.

The right belongs to employees. Workers and self-employed contractors don't get statutory redundancy pay. Check the contract too, as it may promise enhanced redundancy pay.

Under section 162 of the Employment Rights Act 1996, you count back the employee's full years of service, up to a maximum of 20, and give:

• half a week's pay for each full year when they were under 22
• one week's pay for each full year when they were 22 to 40
• one and a half weeks' pay for each full year when they were 41 or older

For redundancies on or after 6 April 2026, a week's pay is capped at £751 and the maximum payment is £22,530. For pay that varies, a week's pay is the average over the 12 weeks before notice.

Example: an employee aged 45 with 10 years' service earning £600 a week gets 6 weeks for the years aged 35 to 40 and 6 weeks for the 4 years aged 41 to 44. That's 12 weeks, or £7,200.

GOV.UK has a redundancy pay calculator. Statutory redundancy pay is tax-free (within the £30,000 limit for termination payments), but notice pay is taxed as normal. Northern Ireland has its own legislation and limits may differ.

Fewer than 20 redundancies: there is no fixed legal timetable, but you should consult each affected employee individually, meeting them in private at least once. Without genuine consultation and fair selection, a dismissal can be unfair.

20 or more at one establishment within 90 days: collective consultation with employee representatives must start at least 30 days before the first dismissal (45 days for 100 or more), and you must notify the Redundancy Payments Service on form HR1. If you don't consult properly, a tribunal can order a protective award of up to 180 days' pay per employee. This doubled from 90 days on 6 April 2026, and no minimum service is needed to claim it.

The Employment Rights Act 2025 will change how the 20-employee threshold is counted, from a date in 2027 that hasn't been fixed. Separately, employees need two years' service to claim unfair dismissal, falling to six months for dismissals on or after 1 January 2027.

Before making someone redundant, look for suitable alternative roles in your business. Pregnant employees and those on maternity, adoption, shared parental or neonatal care leave, and for a period afterwards, must be offered any suitable vacancy ahead of others.

Under section 141 of the Employment Rights Act 1996, if you offer the same or a suitable job before employment ends, starting within four weeks, and the employee unreasonably refuses it, they lose their redundancy pay.

If the new role is different, they get a four-week trial period (Employment Rights Act 1996 s 138), which can be longer for retraining if agreed in writing. If they reasonably decide it isn't suitable during the trial, they keep their right to redundancy pay.