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Helping businesses understand redundancy pay
Written on 29 January 2025
Redundancy is sometimes a necessary evil and, unfortunately, it comes at a cost for employers.
There are various things to think about when carrying out a redundancy exercise, including warning employees of redundancies, creating and applying fair and non-discriminatory scoring criteria, and considering possible alternatives. In the case of large-scale redundancies, you also need to think about collective consultation rules.
Last but by no means least, you need to think about redundancy pay.
Who is entitled to redundancy pay?
Employees who have worked for the employer for at least two years will be eligible for a statutory redundancy payment if the reason for their dismissal is redundancy.
However, an employee will not be entitled to a statutory redundancy payment if:
- They are kept on following a redundancy process; or
- They are offered suitable alternative work and unreasonably refuse.
Additionally, if an employee has been laid off for four weeks in a row, or six weeks in a 13-week period, they can give their employer written notice that they are going to claim a redundancy payment.
The employer can reject the claim if there’s a reasonable chance that normal working hours will be resumed within four weeks.
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How much are employees entitled to?
The amount an employee receives will depend on their age, pay and their length of service.
Employee have the right to be paid as follows:
- Half a week’s pay for each full year if they are under the age of 22;
- One week’s pay for each full year they are 22 or older, but under 41; and
- One and half week’s pay for each full year they are 41 or older.
The maximum length of service that will be taken into consideration for the purpose of a statutory redundancy payment is 20 years.
A week’s pay is capped at £700. Therefore, if the employee has been made redundant after 6 April 2024, the maximum statutory redundancy pay they will receive is £21,000.
Employees need to be provided with a written statement setting out the payment due and explaining how it’s been calculated. If you fail to do so, you may be fined.
Enhanced redundancy pay
Finally, some employers may provide their employees with a contractual right to enhanced redundancy payments.
This will be more generous than the statutory redundancy payment and you may make employees who have less than two years’ service eligible.
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Need help navigating redundancies?
Whether you have a query about redundancy pay or any other part of the redundancy process, WorkNest’s Employment Law and HR experts are here to help.
In addition to expert advice and guidance, our team can assist with documentation, provide hands-on support with redundancy consultations, and deliver training to help your team conduct these tricky exercises confidently and compliantly.
To find out more, get in touch on 0345 226 8393 or request your free consultation using the button below.
