Redundancy Pay & Entitlements: What UK Employers Need to Know 

Statutory redundancy pay is a legal entitlement for UK employees who have been continuously employed for two years or more and are dismissed because their role is no longer required. For employers, managing a redundancy process involves complex calculations based on age and service, strict consultation periods, and the significant risk of unfair dismissal claims if HR records are inaccurate or the process is flawed. 

The operational challenge is not simply calculating a number. It is building a process that is consistent, documented, and defensible at an Employment Tribunal. Inaccurate service records, undocumented selection criteria, or a consultation process that falls short of the statutory minimum can each independently expose the business to significant financial and reputational damage. 

Sources: Employment Rights Act 1996; ACAS Code of Practice on Disciplinary and Grievance Procedures; GOV.UK employer redundancy guidance 

How is statutory redundancy pay calculated? 

The statutory redundancy payment is calculated using a formula that multiplies a number of weeks’ pay by a rate that depends on the employee’s age during each year of service. The formula always works backwards from the date of dismissal, applying the relevant rate to each complete year of service counted from the most recent year first. 

The age and length of service formula 

The weekly multiplier applied to each year of service is determined by the employee’s age during that year: 

• Under 22: half a week’s pay for each full year of service 
• Age 22 to 40: one week’s pay for each full year of service 
• Age 41 and over: one and a half weeks’ pay for each full year of service 

Where an employee’s service spans more than one age band, each year is calculated at the rate applicable for the age the employee was during that particular year. This is the most common source of manual calculation error and is where inaccurate date-of-birth records cause the most direct financial and legal risk. 

The weekly pay cap and maximum entitlement 

A statutory cap applies to the weekly pay figure used in the calculation. For 2025/26, the weekly pay cap is £719. Only the capped figure is used, regardless of the employee’s actual earnings. Service is capped at a maximum of 20 complete years; any years beyond 20 do not count toward the statutory entitlement. 

The maximum statutory redundancy payment is therefore: 20 years × 1.5 weeks × £719 = £21,570. In practice, most payments are lower than the maximum because not all 20 years will fall into the highest age band. 

⚠️  Reviewer flag: weekly pay cap for 2026/27 

The weekly pay cap of £719 is the confirmed 2025/26 figure. The 2026/27 cap is subject to annual uprating by the Secretary of State and should be confirmed by your CIPD reviewer before publication. The maximum entitlement figure and all worked examples should be updated to reflect the confirmed 2026/27 cap once it is announced. 

Worked example: employee aged 45 with 10 years of service 

Total statutory redundancy pay: 12.5 weeks × £719 (2025/26 weekly pay cap) = £8,987.50. If the employee’s actual weekly pay is lower than £719, the actual figure is used. The cap only applies where actual pay exceeds it. 

This example illustrates how year-by-year age-band application produces a higher total than a simple average calculation would suggest. Payroll or HR teams that use a flat multiplier without working year by year will frequently underpay entitlements, creating both financial liability and grounds for a tribunal claim. 

Enhanced redundancy pay 

Employers may offer enhanced redundancy terms above the statutory minimum. Enhanced terms can include a higher weekly pay multiplier, a higher cap on the weekly pay figure, or a greater number of years counted. Where enhanced terms are offered, they must be documented either in the contract of employment, a collective agreement, or a clearly communicated policy. 

Enhanced terms that are applied inconsistently — for example, offered to some employees in a selection pool but not others — create discrimination risk, particularly where the difference in treatment correlates with a protected characteristic such as age or length of service. Any enhanced redundancy policy should specify the eligibility criteria clearly and be applied uniformly across the pool. 

What are the legal requirements for a redundancy consultation process? 

Consultation is a statutory obligation, not an optional courtesy. An employer that fails to consult adequately before making redundancies exposes itself to unfair dismissal claims, which carry uncapped compensation for certain types of dismissal and a potential protective award of up to 90 days’ pay per employee where collective consultation duties are breached. 

The question of whether consultation was adequate is routinely the decisive issue in Employment Tribunal unfair dismissal claims arising from redundancies. The legal standard is not simply whether meetings were held; it is whether those meetings were genuine, took place before a final decision was made, and gave employees a meaningful opportunity to put forward alternatives. 

Individual consultation 

Individual consultation is required in every redundancy, regardless of the number of employees affected. For fewer than 20 redundancies within a 90-day period, there is no statutory minimum consultation period, but the overall process must be fair and reasonable. ACAS guidance provides a practical framework that Employment Tribunals use as a benchmark for assessing fairness. 

Individual consultation should cover: 

• The reason the role is at risk of redundancy 
• How the selection pool has been defined and how the employee has been assessed against the selection criteria 
• Any suitable alternative vacancies within the business 
• The employee’s right to be accompanied by a colleague or trade union representative at formal meetings 
• The employee’s opportunity to challenge the selection decision or put forward alternatives to redundancy 

Each stage of this process must be documented. Verbal consultations that leave no paper trail are legally equivalent to no consultation at all if the employer faces a tribunal claim. 

Collective consultation: when does it apply? 

Where an employer proposes to make 20 or more employees redundant within any 90-day period, collective consultation obligations apply under the Trade Union and Labour Relations (Consolidation) Act 1992 (as amended). These impose additional requirements that operate alongside individual consultation, not instead of it. 

The key obligations are: 

• 20 to 99 redundancies: collective consultation must begin at least 30 days before the first dismissal takes effect 
• 100 or more redundancies: collective consultation must begin at least 45 days before the first dismissal takes effect 
• Notification to the Insolvency Service: employers must submit Form HR1 (Advance Notice of Redundancies) to the Insolvency Service at or before the start of the collective consultation period. Failure to notify is a criminal offence carrying an unlimited fine. 
• Employee representatives: where no recognised trade union exists, affected employees must be given the opportunity to elect representatives with whom the employer is required to consult 

The 30-day and 45-day periods are minimum consultation windows. The consultation must be genuine and meaningful throughout — a period that consists of a series of one-way announcements does not satisfy the obligation. 

⚠️  Protective award: the cost of skipping collective consultation 

Where an Employment Tribunal finds that an employer failed to comply with collective consultation obligations, it can award a protective award of up to 90 days’ gross pay per affected employee. This applies to all employees in the redundancy exercise, not just those who brought the claim. For a business making 50 redundancies at an average gross weekly pay of £600, a full protective award would total approximately £810,000. The protective award is additional to any unfair dismissal compensation and any outstanding redundancy entitlement. 

The importance of a fair selection pool 

Defining the selection pool correctly is one of the most legally significant decisions in any redundancy process. The pool should include all employees whose roles could reasonably be considered for redundancy given the business reason behind the exercise. Artificially narrowing the pool to achieve a predetermined outcome is one of the most common findings in unfair dismissal claims. 

Selection criteria applied within the pool must be: 

• Objective and measurable — criteria such as skills, qualifications, performance ratings, attendance records, and disciplinary history are appropriate where they are applied consistently and are drawn from documented HR records 
• Free from discrimination — criteria must not disproportionately disadvantage employees with a protected characteristic; attendance-based criteria in particular require care where they may interact with pregnancy-related absence, disability-related absence, or periods of statutory leave 
• Consistently applied — the same criteria and scoring methodology must be used for all employees in the pool; deviations that benefit or disadvantage specific individuals undermine the entire selection process 

The connection between selection criteria and HR data quality is direct. An employer that cannot produce an auditable employee record showing disciplinary history, performance scores, absence records, and length of service as of the selection date cannot demonstrate that its selection was objective. Employment Tribunals expect employers to show their working. 

What are the statutory notice period obligations and how does PILON work? 

Employees who are made redundant are entitled to statutory minimum notice based on their length of continuous service, or to payment in lieu of notice if the employer wishes the employee to leave immediately. 

Statutory minimum notice periods 

The statutory minimum notice entitlements under the Employment Rights Act 1996 are: 

• One week’s notice for employees with between one month and two years of continuous service 
• One week’s notice for each complete year of service for employees with between two and twelve years of continuous service 
• Twelve weeks’ notice for employees with twelve or more years of continuous service (the statutory maximum) 

Where the contract of employment specifies a longer notice period than the statutory minimum, the contractual period applies. Employers cannot give less than the statutory minimum regardless of what the contract states. 

Payment in lieu of notice 

Where the employer wishes the employee to leave on the date of dismissal rather than work their notice period, it may make a payment in lieu of notice (PILON). Since April 2018, all PILON payments are subject to income tax and National Insurance Contributions as employment income, regardless of whether the contract contains a PILON clause. This was a significant change from the previous position that contractual PILON alone attracted the tax treatment, and it catches many employers who continue to treat PILON as partially tax-free. 

The taxable amount is the post-employment notice pay, calculated as the basic pay the employee would have received during the notice period. Employers must correctly identify and process the PILON element through the payroll before the final payment is made. Errors in PILON tax treatment create both underpayment-of-tax liability and potential employment contract disputes. 

Garden leave 

Garden leave is an alternative to PILON: the employee serves their notice period but is not required to attend work or carry out duties. During garden leave the employee remains an employee, their pay and benefits continue as normal, and restrictive covenants remain in effect. Garden leave requires either a contractual right or the employee’s agreement, and the employer must continue to pay contractual remuneration throughout. 

What are the risks of poor HR record-keeping during a redundancy process? 

Employment Tribunal claims for unfair dismissal arising from redundancy are among the most costly HR failures a UK business can face. The financial exposure is significant: unfair dismissal compensation includes a basic award (calculated using the same formula as statutory redundancy pay) and a compensatory award, which is capped at the lower of one year’s gross pay or £115,115 for 2025/26. Where discrimination is established, the compensatory award is uncapped. 

The reputational and operational cost compounds the financial exposure. A tribunal finding of unfair dismissal in a redundancy context is not a private matter. It is a public record, frequently reported in trade press, and signals to current employees that the business cannot be trusted to manage their employment fairly. 

Where record-keeping failures create the greatest risk 

The following HR data gaps are the most common contributors to failed tribunal defences in redundancy cases: 

• Inaccurate start dates — an employee whose continuous service has been incorrectly recorded will receive an incorrect statutory redundancy calculation. If the correct date would have produced a higher payment, the employer faces a direct unlawful deduction from wages claim in addition to any unfair dismissal liability. 
• Missing or incomplete disciplinary records — where an employer uses disciplinary history as a selection criterion but cannot produce documentary evidence of the specific incidents relied upon, the selection decision is indefensible. A verbal warning recorded only in a manager’s memory is not evidence. 
• Undocumented performance scores — where selection criteria include performance ratings and the scoring has not been applied consistently or recorded formally, the tribunal can find that the process was a mechanism for removing a predetermined individual rather than a genuine redundancy exercise. 
• Absence records with missing context — where attendance is used as a selection criterion and the records include absence that was pregnancy-related, disability-related, or taken as statutory family leave, the employer must be able to demonstrate that this absence was either excluded from the scoring or that its inclusion did not produce a discriminatory outcome. 
• No contemporaneous consultation notes — meeting notes made retrospectively, or absent entirely, leave the employer unable to demonstrate that consultation was genuine and that the employee’s representations were considered before the final decision was taken. 

Every one of these failure points is directly traceable to the quality of the HR system holding the underlying data. A business managing employee records across spreadsheets, email threads, and individual manager files cannot provide the audit trail that a tribunal expects. By the time a claim is lodged, the time limit for creating compliant records has long passed. 

Employment Tribunal time limits 

An employee has three months less one day from the effective date of termination to submit an Employment Tribunal claim for unfair dismissal. ACAS early conciliation must be attempted before the claim is submitted, and the time limit is paused during the conciliation period. For employers, this means that from the moment the redundancy takes effect, the window in which a claim can arise is running. The record-keeping quality that will determine the outcome of that claim was established months earlier, during the planning and selection stages. 

What is the true cost of managing redundancy on spreadsheets? 

A business planning a redundancy exercise for 30 employees faces the following manual overhead before a single consultation meeting takes place: pulling service records from multiple sources to calculate statutory entitlements; cross-checking date-of-birth and start-date data across HR, payroll, and pension records; building a selection matrix from performance, disciplinary, and attendance data held in different systems; and reconciling any discrepancies before the process can begin. 

This is not a theoretical workload. For a mid-size HR team without integrated software, it routinely takes two to three days of senior staff time to reach a position where the redundancy data can be considered reliable enough to use in a selection exercise. If errors surface during that process — conflicting records, missing information, or data that has not been maintained through periods of parental leave, TUPE transfers, or promotions — the timeline extends further. 

The cost of a single Employment Tribunal claim for unfair dismissal arising from a flawed redundancy is, on average, significantly higher than the cost of the HR software that would have prevented it. Legal representation alone at a multi-day tribunal can reach five figures. Add the management time consumed by the claim, the impact on staff morale, and the risk of an uncapped discrimination finding, and the business case for integrated HR data management is straightforward. 

How does IRIS help employers manage a legally defensible redundancy process? 

Legally defensible redundancy management depends on one thing above all others: a single, accurate, auditable source of truth for every employee record that will be relied upon in the selection process. IRIS Cascade HRi and Staffology HR are designed to provide exactly that. 

IRIS Cascade HRi 

IRIS Cascade HRi is a cloud-based HR platform that maintains a complete, timestamped record of each employee’s employment history: start date, date of birth, role history, performance appraisals, disciplinary and grievance records, absence data with absence-type categorisation, and any changes to terms and conditions. When a redundancy exercise begins, the selection pool data is drawn from a single verified source rather than reconstructed from disconnected records. 

For collective redundancy exercises, Cascade HRi supports the management of consultation documentation, tracks employee representative engagement, and maintains a record of the formal consultation meetings and any employee representations made during the process. This documentation is available for export in a format suitable for tribunal evidence without manual reconstruction. 

Staffology HR 

Staffology HR provides integrated HR and payroll data management for businesses that need consistent employee records across both functions. Because statutory redundancy pay calculations depend on the same continuous service and earnings data used for payroll, the risk of discrepancies between HR and payroll records is material. Staffology HR eliminates this gap by maintaining a shared data layer that both functions draw from, ensuring that the start date and pay history used to calculate the statutory entitlement are the same figures held in the HR record. 

Staffology HR also supports the offboarding process: generating the P45 at the point of termination, calculating any outstanding holiday accrual, and producing the documentation required for the employee’s final payslip. Where PILON is applicable, the taxable post-employment notice pay calculation is handled within the system rather than through a manual spreadsheet adjustment. 

Neither platform guarantees compliance with a redundancy process; the quality of the underlying judgements, the conduct of consultations, and the consistency of selection remain the employer’s responsibility. What both systems do is remove the data quality risk that turns procedurally manageable redundancy exercises into tribunal claims. 

Employer Redundancy Obligations: Frequently Asked Questions 

Do employers have to pay redundancy pay to part-time employees? 

Yes. Part-time employees have the same statutory redundancy rights as full-time employees, provided they meet the two-year continuous service threshold. The Part-Time Workers (Prevention of Less Favourable Treatment) Regulations 2000 require that part-time workers are not treated less favourably than comparable full-time workers. The weekly pay used in the calculation is based on the part-time employee’s actual contractual earnings, subject to the same statutory weekly pay cap that applies to full-time employees. Treating part-time employees as not entitled to redundancy pay, or calculating their entitlement on a reduced basis compared to full-time colleagues without contractual justification, exposes the employer to both an unlawful deduction from wages claim and a potential Part-Time Workers Regulations claim. 

What is the penalty for failing to comply with collective consultation obligations? 

Where an Employment Tribunal finds that an employer failed to comply with its collective consultation obligations — either by not consulting at all, by consulting for less than the statutory minimum period, or by failing to consult with appropriate employee representatives — it can award a protective award of up to 90 days’ gross pay per affected employee. The protective award applies to all employees covered by the redundancy exercise, not only those who brought the claim. Failure to notify the Insolvency Service via Form HR1 at the start of the collective consultation period is a separate criminal offence carrying an unlimited fine for the employer. These obligations are not triggered only by large employers; any employer proposing 20 or more redundancies within 90 days is in scope. 

Can an employer offer a suitable alternative role instead of making an employee redundant? 

Yes, and employers are required to consider suitable alternative employment before confirming redundancy. Where a suitable alternative vacancy exists, the employer must offer it to the employee at risk of redundancy. The employee is entitled to a four-week trial period in the alternative role. If the employee unreasonably refuses a suitable alternative offer, they may forfeit their entitlement to a statutory redundancy payment. 

Whether an alternative role is “suitable” depends on factors including the level of pay, status, hours, location, and the nature of the work compared to the original role. A significant reduction in pay or seniority is unlikely to be treated as a suitable alternative. Employers should document the basis on which alternative roles were considered and offered, as this evidence is material in any subsequent unfair dismissal or wrongful redundancy claim. 

What counts as continuous service for redundancy purposes? 

Continuous service is calculated from the employee’s start date with the employer and runs without interruption. Periods of maternity leave, paternity leave, shared parental leave, adoption leave, and sick leave all count as continuous service. Service through a TUPE transfer is preserved — employees who transferred into the business retain their original start date for redundancy purposes, not the date of the TUPE transfer. Employers who maintain start-date records based on the TUPE effective date rather than the original employment start date will systematically undercalculate statutory redundancy entitlements for transferred employees. This is a common and significant source of unlawful deduction from wages liability in businesses that have grown through acquisition. 

Is accrued holiday paid out on redundancy? 

Yes. Employees are entitled to payment for any accrued but untaken statutory annual leave as at the termination date. The calculation is based on the employee’s daily rate of pay multiplied by the number of accrued days outstanding. If the employee is in their notice period and the employer wishes to require them to take accrued leave during that period, specific notice provisions apply. Where accrued holiday pay is underpaid or not paid at all, the employee has a claim for unlawful deduction from wages. 

Can redundancy pay be offset against the employee’s notice pay or other terminal payments? 

Statutory redundancy pay itself is a separate entitlement and cannot be offset against notice pay, PILON, or other terminal payments. It is paid in addition to any contractual payment in lieu of notice, outstanding holiday pay, or other sums owed. The first £30,000 of a genuine redundancy payment (the aggregate of statutory redundancy pay and any non-contractual ex gratia element above the statutory minimum) is exempt from income tax. The statutory redundancy payment element is also not subject to National Insurance Contributions. Contractual PILON is fully taxable and subject to NIC regardless of how it is described. Employers who conflate these different payment types in a single settlement figure run the risk of incorrectly applying tax exemptions.