UK Redundancy Guide 2026 — Process, Pay, Rights, What to Do

1. What UK redundancy actually is

Redundancy in UK employment law has a specific definition. It's not just "being let go" — it's a particular type of dismissal where the role itself is no longer needed. The Employment Rights Act 1996 says redundancy applies when:

1. The business or workplace is closing entirely
2. The work the employee was doing is no longer needed
3. Fewer staff are needed for the existing work
4. The work has moved location and the employee can't reasonably be expected to relocate

If an employer dismisses you for "redundancy" but the role is later filled by a new hire, that's not genuine redundancy — it's likely unfair dismissal disguised as redundancy. The role itself, not the person, must become unnecessary.

Redundancy is treated differently from other dismissals: you receive statutory redundancy pay (after 2 years' service), have specific consultation rights, and have a stronger case for unfair dismissal if the process isn't followed properly.

2. The UK redundancy process

UK redundancy must follow a fair process. The key stages:

1. Announcement: Employer announces that redundancies are being considered. For collective redundancies (20+ at one site), this triggers statutory consultation requirements.
2. Consultation: The employer must consult with affected staff individually and (for collective redundancies) with employee representatives. Minimum periods: 30 days for 20-99 staff, 45 days for 100+. Individual consultation must be "meaningful" — typically 2-4 weeks.
3. Selection criteria: If reducing staff numbers, the employer must use objective, non-discriminatory selection criteria (skills, performance, attendance, qualifications, length of service).
4. Selection pool: The pool of staff considered for redundancy must be defined and reasonable.
5. Alternative roles: The employer must consider whether suitable alternative employment exists within the company.
6. Notice of redundancy: Once selected, the employee receives notice (statutory or contractual, whichever is longer).
7. Final pay: Statutory redundancy pay + outstanding wages + accrued holiday pay + any ex-gratia / contractual enhanced redundancy.

Total elapsed time: 6-12 weeks for individual redundancies, longer for collective. If any of these stages is skipped or rushed, you may have grounds for unfair dismissal.

3. Statutory redundancy pay 2026/27

UK statutory redundancy pay is calculated by age band and length of service. The 2026/27 rates:

Caps for 2026/27:

• Weekly pay cap: £719 (uprated April 2026)
• Length of service cap: 20 years
• Maximum statutory redundancy: £21,570 (20 × 1.5 × £719)
• Tax-free amount: £30,000 (statutory + ex-gratia combined)

Use our UK Redundancy Pay Calculator for a precise calculation including age-band weighting, weekly cap, and tax-free portion.

4. Ex-gratia and enhanced redundancy packages

Many UK employers offer enhanced redundancy packages above the statutory minimum. Common patterns:

• Service-based enhancement: "1 month's salary per year of service" (more generous than statutory weekly cap)
• Multiplier of statutory: "2x or 3x statutory entitlement" common in financial services
• Fixed-amount uplift: "Statutory + £10,000 ex-gratia" — often used in smaller redundancy rounds
• Period-based uplift: "Statutory + 3 months' salary" — common in tech and professional services
• Tiered by seniority: Junior staff get statutory; senior staff get statutory + larger ex-gratia

Public sector schemes (NHS, civil service) often have very generous redundancy formulas — sometimes 1-2 months' salary per year of service for long-serving staff. Private sector enhanced packages are highly variable.

Negotiation is sometimes possible at the offer stage, especially in smaller redundancy rounds or when employee has leverage. See our UK redundancy negotiation guide.

5. UK settlement agreements

A UK settlement agreement (formerly compromise agreement) is a legally binding agreement where you give up the right to bring legal claims against the employer in exchange for a payment. Common in UK redundancy situations.

Key UK settlement agreement requirements:

• Must be in writing.
• You must take independent legal advice from a qualified solicitor or trade union representative. The employer typically pays the legal fee (usually £500-£1,500).
• The agreement must specify the claims being waived — typically unfair dismissal, redundancy, discrimination claims.
• Cannot waive certain rights — accrued pension, criminal injury, personal injury claims.
• Must be signed voluntarily — coercion invalidates the agreement.

What to negotiate in a UK settlement agreement:

• The financial settlement amount (statutory + ex-gratia)
• The reference wording your employer will provide
• The departure announcement / internal communications
• Outplacement support funding
• Treatment of share options or LTIPs (especially senior roles)
• Restrictive covenants — duration and scope post-employment
• Any ongoing benefits (medical insurance for a period, etc.)

Always have independent legal advice before signing. The cost is almost always paid by the employer; the value of advice is typically far greater than the fee. See our UK settlement agreement guide.

6. Tax on UK redundancy 2026/27

UK redundancy tax rules in 2026:

• First £30,000 tax-free: Statutory redundancy + ex-gratia + certain other ex-gratia compensation combined.
• Above £30,000: Taxed as ordinary employment income at your marginal rate (20%, 40%, or 45%).
• PILON (Payment In Lieu Of Notice): Taxed as normal salary income, not under the redundancy £30,000 exemption.
• Outstanding wages and unused holiday: Taxed as normal salary income.
• National Insurance: Statutory redundancy and the first £30,000 of ex-gratia is NI-free; PILON and amounts above £30,000 are NI-able.

The tax-free £30,000 threshold has been frozen since 1989 — it's worth significantly less in real terms than originally intended. Senior redundancies often exceed this threshold, making tax planning important.

Use our UK Redundancy Pay Calculator for the post-tax breakdown including the £30,000 exemption and PILON treatment.

7. Your UK redundancy rights

UK employees facing redundancy have specific legal rights under the Employment Rights Act 1996 and Equality Act 2010:

• Right to consultation: Meaningful consultation about the redundancy and selection criteria.
• Right to written reasons: Written explanation for selection if requested.
• Right to be considered for alternative roles: Suitable alternative employment must be considered.
• Right to time off to look for work: If you have 2+ years service, paid time off during notice period for job search and training.
• Right to statutory redundancy pay: If you have 2+ years service and qualify (some exclusions apply for small businesses, fixed-term contracts ending naturally).
• Right not to be discriminated against: Selection cannot be based on protected characteristics (age, gender, race, disability, etc.).
• Right to claim unfair dismissal: If selection or process was unfair, especially for those with 2+ years service.
• Right to appeal: Internal appeal process should be available.

See our UK redundancy rights guide for full statutory protections.

8. Voluntary vs compulsory redundancy

UK employers often run voluntary redundancy schemes before compulsory ones to reduce headcount with less disruption.

Voluntary redundancy:

• Employee chooses to leave with redundancy package
• Often more generous package than compulsory (incentive to volunteer)
• Employer keeps right to refuse if too many volunteer or wrong people volunteer
• Tax treatment same as compulsory (£30,000 exemption applies)
• You waive certain claims by accepting

Compulsory redundancy:

• Employer selects you under fair process
• Statutory redundancy pay + any ex-gratia
• Possible grounds for unfair dismissal claim if process unfair
• Same tax treatment

See our specific guides: voluntary redundancy, compulsory redundancy.

9. What to do at each stage of UK redundancy

Week 1 (announcement):

• Get the announcement in writing
• Don't sign anything yet
• Calculate your statutory redundancy entitlement
• Notify your bank, mortgage provider, and any direct debits if you're concerned about cashflow
• Update your CV and LinkedIn

Weeks 2-4 (consultation):

• Engage with the consultation process — ask questions, raise concerns
• Document everything in writing
• Take notes during all consultation meetings
• Ask about alternative roles within the company
• Start applying for external roles

Weeks 4-8 (offer/notice):

• Review settlement agreement carefully (if offered)
• Take legal advice — employer typically pays
• Negotiate terms (financial, reference, restrictive covenants)
• Don't sign in the meeting — take it home, sleep on it
• Confirm the final agreed terms in writing before signing

Notice period:

• Use paid time off rights for job search if you have 2+ years service
• Document all final pay components — wages, holiday, redundancy, PILON
• Verify final payslip carefully — payroll errors are common at exit
• Set up the next role before exit if possible

10. Challenging unfair UK redundancy

UK employees with 2+ years service can claim unfair dismissal if redundancy was unfair. Common grounds:

• No genuine redundancy reason: The role wasn't actually being eliminated, but disguised dismissal.
• Unfair selection: Selection criteria were biased, vague, or applied inconsistently.
• No meaningful consultation: Process was rushed or token.
• Discrimination: Selection based on age, gender, race, disability, or other protected characteristics.
• No alternative roles considered: Suitable alternative employment available but not offered.
• Below statutory consultation period: Less than 30/45 days for collective redundancies.

UK redundancy challenge process:

1. Internal grievance / appeal first
2. ACAS Early Conciliation (statutory step before any tribunal claim)
3. Employment Tribunal claim if Early Conciliation doesn't resolve (3-month time limit from dismissal)
4. Possible compensation: up to £115,115 or 52 weeks' pay, whichever is lower (2026)

Take legal advice before filing a tribunal claim. Many UK redundancy disputes settle at ACAS Early Conciliation stage with negotiated payouts. Cost-benefit varies by case.

11. After redundancy — next steps

Three priorities after UK redundancy:

1. Financial planning. Calculate runway from redundancy + savings. Most UK candidates need 3-6 months for a new role at the same level. Tighten non-essential expenses immediately. Consider whether to pause pension contributions, claim Universal Credit for the gap period, or use ISAs strategically.
2. Job search structure. Update CV and LinkedIn with the redundancy framed neutrally ("seeking next opportunity following organisational change at [Company]"). Apply to 5-10 roles per week. Use our UK CV Format Guide and UK Interview Guide.
3. Consider career pivot. Redundancy is often a forced opportunity to reconsider career direction. If your sector is contracting (financial services, traditional retail, certain manufacturing), use the redundancy period to retrain. See our UK Career Change Guide.

Most UK candidates I've worked with through redundancy land their next role within 8-12 weeks at a similar or better level. The first 2-3 weeks of structured job search make the biggest difference.

12. UK redundancy tools and resources