Redundancy: Your Rights, Consultation and Statutory Redundancy Pay
Redundancy is a dismissal because the job has disappeared. Your employer must select fairly, consult you and give notice, and after two years of service you get statutory redundancy pay of up to £22,530 (2026/27), tax free.
Key points
- Redundancy means the business or your workplace is closing or fewer people are needed for your kind of work; it is not a way to remove someone for performance or conduct.
- Employers must use a fair pool and objective criteria and consult you individually; 20 or more redundancies within 90 days trigger collective consultation of at least 30 or 45 days.
- Statutory redundancy pay needs two years of service and pays half, one or one and a half weeks' pay per year by age, up to 20 years, capped at £751 a week and £22,530.
- Redundancy payments up to £30,000 are tax free, but notice pay, holiday pay and bonuses are taxed as earnings.
- A sham or badly handled redundancy can be challenged as unfair dismissal; notify Acas first and claim within six months less one day of a dismissal taking effect on or after 1 October 2026.
Redundancy is a dismissal that happens because your employer is closing down, closing your workplace or needs fewer people to do work of your kind. In England and Wales your employer must have a genuine redundancy situation, select fairly, consult you properly and give you notice, and if you have at least two years of service you are entitled to statutory redundancy pay, which is tax free and currently capped at £22,530. This guide explains the legal definition, how selection and consultation should work, what you are owed, the rules on alternative jobs and trial periods, and how to challenge a redundancy that is not what it seems.
What counts as a redundancy
Section 139 of the Employment Rights Act 1996 defines redundancy as a dismissal wholly or mainly attributable to one of three situations: the employer has stopped, or intends to stop, carrying on the business; it has stopped, or intends to stop, carrying on the business at the place where you work; or its need for employees to carry out work of a particular kind, either generally or at your workplace, has ceased or diminished or is expected to.
The test is about the employer's need for employees, not the amount of work. A business can be busier than ever and still have a redundancy situation if it reorganises so that fewer people are needed, replaces staff with technology or contractors, or closes a site. Equally, a job that still needs doing and is simply handed to a new recruit is not redundant, however the dismissal is labelled. Poor performance, personality clashes and sickness absence are not redundancy reasons; dressing them up as redundancy is a sham, and the dismissal can be challenged as unfair.
Fair selection and individual consultation
Redundancy is one of the five potentially fair reasons for dismissal, but the dismissal is only fair if the employer handles it reasonably. Since the early 1980s tribunals have expected a reasonable employer to warn staff of the risk as early as possible, consult them genuinely, choose a sensible pool of employees from which to select, apply objective criteria consistently and look for alternatives to dismissal.
The pool and the criteria
The pool is the group of employees doing the same or interchangeable work from which the redundancies are chosen. Employers have some latitude in defining it, but a "pool of one" that conveniently contains only the person they want to remove will be scrutinised. Selection criteria should be measurable and verifiable as far as possible: skills and qualifications, disciplinary record, attendance (ignoring pregnancy and disability-related absence) and appraised performance are common. Selection because of pregnancy, maternity or family leave, trade union activity, whistleblowing, part-time status or any protected characteristic is automatically unfair or discriminatory, with no qualifying service needed. Length of service on its own can amount to age discrimination unless the employer can justify it.
What consultation involves
Individual consultation means telling you that your role is at risk, explaining why and how you have been selected, sharing your scores, listening to your representations and considering alternatives before any decision is final. Expect at least one meeting, the right to be accompanied by a colleague or union representative and a right of appeal, even though the Acas disciplinary Code does not formally apply to redundancy. Consultation after the decision has been taken is not consultation.
Employees who are pregnant or on maternity, adoption or shared parental leave, and for up to 18 months after the birth or placement under rules introduced on 6 April 2024, have priority over colleagues for any suitable alternative vacancy that exists.
Collective consultation for 20 or more redundancies
Where an employer proposes to dismiss 20 or more employees as redundant at one establishment within 90 days or less, section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 adds a collective duty. The employer must consult with a recognised trade union or, where there is none, with employee representatives elected for the purpose, and must notify the Redundancy Payments Service on form HR1. Consultation must start in good time and at least 30 days before the first dismissal takes effect where 20 to 99 redundancies are proposed, and at least 45 days before where 100 or more are proposed. It must cover ways of avoiding the dismissals, reducing their number and mitigating their effects, with a view to reaching agreement.
If the employer fails to consult, a tribunal can make a protective award of up to 180 days' pay for each affected employee, a ceiling the Employment Rights Act 2025 doubled from 90 days on 6 April 2026. Failing to notify the Redundancy Payments Service is a criminal offence with an unlimited fine. From April 2027 the same Act changes the way the 20-employee threshold is counted so that redundancies spread across an employer's different sites can trigger collective consultation, with the detail set by regulations; the guide to the employment law changes in 2026 and 2027 tracks the timetable.
Notice, pay in lieu and time off to look for work
Redundancy ends the contract, so you are entitled to notice. Section 86 of the 1996 Act sets the minimum: one week once you have a month of service, one week for each complete year from two to twelve years, and twelve weeks after twelve years or more. Your contract may give more but cannot give less. The employer can ask you to work the notice, put you on garden leave, or pay you in lieu if the contract allows or you agree; a payment in lieu is taxed as earnings.
If you have two years of service by the date your notice ends, you are entitled to reasonable paid time off during the notice period to look for another job or arrange training, under section 52 of the 1996 Act. The employer must pay for that time up to 40% of a week's pay in total, so two days for someone working a five-day week, and may only refuse requests on reasonable grounds.
Statutory redundancy pay: who gets it and how much
Statutory redundancy pay under sections 135 and 162 of the 1996 Act is owed to employees with continuous service of at least two years at the date their employment ends. It is worked out from your age and complete years of service, counting a maximum of 20 years:
- half a week's pay for each complete year worked while you were under 22;
- one week's pay for each complete year worked while you were aged 22 to 40;
- one and a half weeks' pay for each complete year worked while you were 41 or over.
For dismissals on or after 6 April 2026 a week's pay is capped at £751, so the most anyone can receive is 30 weeks at that rate, £22,530. The cap is reviewed every April, and GOV.UK publishes a calculator. The employer must give you a written statement showing how the figure was calculated. Someone aged 45 with ten years of service earning £900 a week would receive one and a half weeks for each of the four years from age 41, plus one week for each of the six years before that, which is 12 weeks at the capped £751, or £9,012.
Statutory redundancy pay is free of income tax and National Insurance, and it counts towards the £30,000 that can be paid tax free on termination; enhanced redundancy pay under a contractual or discretionary scheme uses the same allowance, while notice pay, holiday pay and bonuses are taxed as normal. Many employers offer enhanced schemes, often an uncapped week's pay or a multiple of the statutory figure, and the terms may be in your contract, a collective agreement or a long-standing custom. If your employer is insolvent, the Redundancy Payments Service pays statutory redundancy pay, up to eight weeks' unpaid wages, statutory notice pay and up to six weeks' holiday pay from the National Insurance Fund, each capped at £751 a week.
You lose the right to the payment if you are dismissed for gross misconduct, if you unreasonably refuse suitable alternative employment, or if you leave early without the employer's agreement before your notice is due to end. A claim for unpaid statutory redundancy pay must be made to the employer in writing or to a tribunal within six months of the date your employment ended, a limit the 2026 changes did not alter.
Suitable alternative employment and the four-week trial period
An employer must consider whether there is other work you could do, and if it offers you a suitable alternative job that starts within four weeks of the old one ending, you have a statutory trial period of four weeks in the new role under section 138 of the 1996 Act. The trial can be extended for retraining, but only by a written agreement made before it starts that says when it will end and what terms apply afterwards.
If you reasonably reject the new job during the trial because it is not suitable, for example because the pay, status, hours, location or skills required are materially worse, you are treated as redundant from the original date and keep your redundancy pay. If you unreasonably refuse an offer of suitable alternative employment, or stay beyond the trial period without objecting, you lose the right to statutory redundancy pay. Whether an offer is suitable is judged objectively against your old job; whether your refusal is reasonable depends on your personal circumstances, such as caring responsibilities or travel time. Take advice before refusing any offer.
Challenging a redundancy and getting advice
A redundancy can be challenged as unfair dismissal where the situation is a sham, the pool or criteria were unfair, consultation was inadequate or alternatives were not considered. For the ordinary claim you need the usual qualifying service: two years where the dismissal takes effect by 31 December 2026, six months where it takes effect on or after 1 January 2027. Automatically unfair selection and discrimination claims need no service, and the guide to discrimination at work explains them. You must notify Acas for early conciliation first and present any claim within six months less one day of the dismissal date where that date is on or after 1 October 2026; the employment tribunal process guide sets out the stages. Compensation for an unfair redundancy is a compensatory award for your losses, since the basic award is normally cancelled out by the redundancy pay already received.
Many redundancies end with a settlement agreement in which the employer offers an enhanced payment in return for a waiver of claims; the agreement is binding only if you have independent legal advice, and the employer usually contributes to the cost. An employment law solicitor can check the figures, test whether the redundancy is genuine, negotiate the package and advise whether a claim is worth the delay. Fixed fees for settlement advice are the norm; contested claims are charged hourly, on a no win no fee basis for strong cases, or paid for by legal expenses cover on an insurance policy or by a trade union. Acas, Citizens Advice and the GOV.UK redundancy pages give free guidance. To find help locally, compare employment law solicitors in Leeds or search for employment solicitors in Sheffield, and read the overview of what employment law covers for the wider context.
Frequently asked questions
Can I be made redundant while pregnant or on maternity leave?
Yes, if there is a genuine redundancy and you are selected fairly, but you have extra protection. From the moment you tell your employer you are pregnant until 18 months after the birth, and similarly after adoption or shared parental leave, you must be offered any suitable alternative vacancy ahead of other employees. Selecting you because of pregnancy or maternity is automatically unfair and discriminatory with no minimum service, and compensation for discrimination is uncapped.
Do I get redundancy pay with less than two years of service?
Not under the statutory scheme, which starts at two years of continuous service. You are still entitled to your notice, or pay in lieu, and to pay for untaken holiday, and your contract or a company scheme may offer a redundancy payment on more generous terms. Check the handbook and any collective agreement. The Employment Rights Act 2025 does not change the two-year threshold for statutory redundancy pay, only the qualifying period for unfair dismissal.
Is redundancy pay taxed?
Statutory redundancy pay is paid without deductions and counts towards a £30,000 allowance that covers genuine redundancy and ex gratia termination payments free of income tax and National Insurance. Anything above £30,000 is taxed as income, with the employer paying National Insurance on the excess. Pay for your notice period, including pay in lieu, holiday pay, bonuses and commission are taxed in the normal way whatever the paperwork calls them.
Can an employer make someone redundant and then advertise the job?
If the same job still needs doing, the dismissal was probably not a redundancy within section 139, and it can be challenged as unfair dismissal or, where the recruit simply replaces you more cheaply, as a sham. Employers can legitimately recruit later if circumstances change, or hire for a genuinely different role, so the timing and the job description matter. Keep copies of the advert and take advice quickly because of the time limit.
What happens if the employer goes bust?
If the business is insolvent and cannot pay, you claim from the Redundancy Payments Service, part of the Insolvency Service, using the case reference from the insolvency practitioner. It pays statutory redundancy pay, up to eight weeks of unpaid wages, statutory notice pay and up to six weeks of holiday pay, with each week capped at £751, usually within a few weeks of a completed application. Enhanced contractual redundancy pay is not covered and becomes a claim in the insolvency.
Can I refuse an alternative job and keep my redundancy pay?
You can refuse without losing anything if the job is not suitable or your refusal is reasonable, judged against your pay, status, hours, location, skills and personal circumstances. If the job is suitable and you refuse unreasonably, you lose the statutory payment. The four-week trial period lets you test the role without risk, provided you tell the employer within the trial if it is not working, so use it rather than refusing outright.
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This guide describes the law in England and Wales as at 30 October 2026. It is general information, not legal advice about your situation; the law and the figures it quotes change, so check the position with a solicitor before acting. LawFirms.co.uk is a directory and does not provide legal services.