Key Takeaways
- Notice pay in a redundancy settlement is calculated using your contractual or statutory notice period, whichever is longer, based on your normal weekly pay.
- Your settlement agreement should clearly show how notice pay has been worked out, including details of any payment in lieu of notice (PILON) and whether you work or are paid for your notice.
- Notice pay is almost always taxable, unlike some ex gratia or tax-free redundancy payments, and it is important to check the correct tax treatment in your settlement calculations.
- Bonuses, commission and regular allowances often count towards notice pay if they form part of your normal pay, so review your agreement to ensure these are included.
- Untaken holiday pay is usually paid on top of notice pay and should be listed separately in your redundancy settlement.
- Our solicitors can review your settlement agreement, identify errors or undervalued notice pay, and negotiate improved redundancy settlement calculations if necessary.
- Getting advice before signing your settlement agreement helps prevent costly mistakes or missed entitlements, and our service is free to you because your employer pays the legal fees.
- Settlement Agreement Lawyers is an SRA regulated firm rated Excellent, with more than 1,400 five-star reviews of our solicitors on Trustpilot, Google and similar sites.
How is notice pay calculated in a redundancy settlement?
If you have been offered a redundancy settlement agreement, notice pay is calculated using either your contractual or statutory notice period—whichever is longer—based on your normal weekly pay, with extras like bonuses or regular allowances usually included. Your employer should set out how this figure has been worked out, including any payment in lieu of notice (PILON), and notice pay is almost always taxable, unlike some redundancy payments. It is a legal requirement to get independent legal advice before signing, and your employer usually pays our legal fees so the service is free to you.
Getting the calculation right matters because your settlement agreement waives your right to bring future claims, and errors or undervalued notice pay are common, especially when variable pay or holiday pay is involved. Our solicitors will review your agreement, check your notice pay calculations, advise you on your employment rights and tax implications, and can negotiate with your employer if anything is incorrect or unfair—always at no personal cost to you.
In this article you’ll learn exactly how notice pay in a redundancy settlement works, how to check your figures, common mistakes, key negotiation tips, and the tax rules you need to know before signing. For clear, fast advice, you can call our solicitors on 0800 054 1144 or book your settlement agreement advice online.
How is notice pay calculated in a redundancy settlement?
Notice pay in a redundancy settlement is typically calculated based on your ordinary earnings during your statutory or contractual notice period—whichever is longer—unless a different agreement is reached via the settlement agreement. The process considers your current pay (including average hours, any guaranteed bonuses and allowances) to assess the correct sum owed either for working your notice or as a payment in lieu of notice (PILON). Calculations must be precise and reflect your actual notice entitlement, ensuring compliance with both legal and contractual rights.
Notice pay forms a key component of redundancy settlement agreements as it compensates you for the period between the dismissal notice and your agreed leaving date. It is separate from your statutory redundancy pay and other termination payments such as accrued holiday or ex gratia sums. In England and Wales, your notice pay entitlement is protected by law and must meet at least the statutory minimum set out in the Employment Rights Act 1996, although your contract may award you a longer notice period.
An employee with five years’ service, earning £650 per week, is given a four-week notice period (the contractual entitlement). The statutory notice minimum is one week per year of service, so five weeks in this case. The employee must receive pay for five weeks—the longer statutory period—regardless of what the contract says, unless a more generous contractual notice is provided.
For more detail on redundancy law, notice periods and pay, ACAS offers official guidance in its settlement agreements advice and notice rights on redundancy.
What is notice pay in a redundancy settlement agreement?
Notice pay is the sum paid to you by your employer to cover the contractual or statutory notice period when your employment ends. In a redundancy settlement, this pay is often included as part of the overall exit package, either as a payment in lieu of you working your notice or as wages during a worked notice period. The applicable notice period is the greater of your statutory or contractual entitlement.
Statutory notice, as defined in s.86 Employment Rights Act 1996, is at least one week’s notice after one month of service, increasing by one week per year up to a maximum of twelve weeks. Your employment contract might entitle you to a longer period. The amount paid reflects your normal gross wages, plus contractual benefits, unless varied by written agreement.
Notice pay is distinct from statutory redundancy pay (a separate right under s.135 ERA 1996), holiday pay, and discretionary ‘ex gratia’ settlement amounts. It must be detailed clearly in the settlement agreement to avoid disputes or errors in calculation, and is usually subject to income tax and National Insurance unless specific exemptions apply.
Always obtain a breakdown of your redundancy package, as some employers mistakenly combine notice pay with redundancy pay. Review your settlement agreement or ask our solicitors to check that your notice pay is listed and calculated separately.
For guidance on your rights to notice and redundancy, see our redundancy expertise page and the official government redundancy notice guidance.
Statutory vs contractual notice pay: which applies to you?
Your notice pay in a redundancy settlement depends on which of your contractual or statutory notice periods is longer. Statutory notice is set by law (one week per full year’s service, up to twelve weeks). If your written contract gives you a longer notice period—for example, three months or a specific calendar period—that contractual period prevails. If your contract offers less than the statutory minimum, the statutory period overrides it.
Employers must meet the longer of the two periods when calculating notice pay for settlement purposes. The pay amount typically mirrors your normal working salary, including regular allowances and guaranteed overtime or commission. Discretionary bonuses do not usually count, but guaranteed elements do. If you are asked to work your notice, you receive usual pay over the period. If not, you are paid in lieu of notice (PILON).
| Basis | Notice Period | Must Employer Use Higher? | Included in Pay Calculation |
|---|---|---|---|
| Statutory Notice (s.86 ERA) | 1 week per year | Yes, if longer | Weekly pay, guaranteed benefits |
| Contractual Notice | As per contract | Yes, if longer | Weekly pay, contract benefits |
If your contract specifies four weeks’ notice but you’ve worked seven years, your statutory entitlement is seven weeks—so your employer must pay you for seven weeks, not four.
If you are uncertain which notice period applies to your circumstances, review your contract or speak to our solicitors for tailored settlement agreement advice.
Why is independent legal advice required for settlement agreements? (s.203 Employment Rights Act 1996)
Independent legal advice (ILA) is a statutory requirement for any settlement agreement under s.203 Employment Rights Act 1996. The law states you cannot validly waive your employment rights—including your entitlement to proper notice pay—without first taking advice from a qualified, independent solicitor, trade union adviser, or certain other regulated professionals.
Your employer must pay for this advice; it should cost you nothing. The solicitor’s role is to explain the effect of the agreement, ensure that your rights (including to notice pay) are not unfairly waived or underpaid, and confirm you understand all the terms. Our solicitor provides the mandatory ILA certificate confirming compliance, without which the agreement is unenforceable.
ILA is particularly vital in redundancy settlements because errors or omissions in notice pay calculation can result in lost income or unexpected tax. Taking proper advice ensures these sums, and any associated tax treatment, are fully correct and that you are not left out of pocket.
Do not sign or agree to any settlement or redundancy package until our solicitor has reviewed it and issued your ILA certificate—early legal input is crucial, especially for notice and termination payment disputes.
If you have questions about funding or the ILA process, our funding and free-for-employees guide explains this protection in detail.
If you need prompt, expert advice on your redundancy settlement and want to ensure your notice pay is right, call our settlement agreement solicitors free today on 0800 054 1144, or book your settlement agreement advice online for a same-day remote ILA appointment. There is no cost to you as the employer pays our fees.
How do employers calculate notice pay in a settlement agreement?
Employers must accurately calculate notice pay based on the length of your applicable notice period and your normal pay. First, they determine whether contractual or statutory notice is longer. Next, they calculate your “normal pay”, which may include basic salary, guaranteed bonuses, some allowances, and regular contractual benefits. Statutory guidance requires that they use your normal working hours and arrangements in effect at the time of redundancy.
Notice pay may be included as an explicit line in the settlement agreement or bundled with other sums, but for clarity and tax reasons, it should be listed separately. Errors can occur if employers overlook enhancements to pay, such as recent pay rises, fluctuating allowances, or guaranteed commission.
A typical employer calculation process:
- Confirm whether statutory or contractual notice period applies.
- Establish your normal weekly earnings, including all contractual elements owed during notice.
- Multiply weekly pay by the number of notice weeks.
- Adjust for any deductions (tax/PAYE) and confirm whether PILON or worked notice applies.
- Present breakdown for your agreement and legal review.
Ask your employer for a full breakdown of your notice pay calculation—request written clarification of what is included (salary, any regular allowances) and check whether the correct notice period has been applied.
You can use our settlement agreement calculator to estimate your own notice pay, or if redundancy-related, our redundancy calculator may also help pinpoint your entitlement.
What counts as ‘normal pay’ for notice pay? (Bonuses, commission, allowances)
Normal pay is not always just your base salary. For statutory notice, it is defined as the gross pay you would have earned had you worked as usual during your notice period. This routinely includes:
- Basic pay (salary or hourly wage)
- Regular shift allowances, role-specific premiums
- Overtime (if contractually guaranteed)
- Commission and bonuses (if regularly paid as part of contract, not one-off/discretionary)
Statutory notice pay must reflect “week’s pay” principles in s.220–229 Employment Rights Act 1996. Contractual notice may be governed by your employment contract’s definition. If your pay varies, your average over the past 12 weeks is typically used.
Discretionary bonuses, employer pension contributions, and certain one-off perks are usually outside normal pay unless your contract says otherwise. If in doubt, seek a careful review of payslips, bonus policy, and contract terms.
An employee earns £500 weekly, with a contractual shift allowance of £50, and a regular monthly bonus of £100 recorded as contractual. Normal weekly pay = £650 for notice pay purposes.
If you suspect the employer has missed a regular allowance or commission in your payout, ask our solicitors for a full breakdown and legal check.
Examples of redundancy notice pay calculations
A few examples will clarify how notice pay works in redundancy settlements:
- Statutory minimum: Employee with 6 years’ service, £600/week basic, no contractual notice—statutory period = 6 weeks. Notice pay = £600 x 6 = £3,600.
- Contractual longer than statutory: Employee of 3 years, £700/week, 8-week notice in contract—contractual period applies. Notice pay = £700 x 8 = £5,600.
- Variable pay: Employee of 4 years, paid hourly with irregular shifts, average pay over last 12 weeks is £400/week. Statutory period = 4 weeks. Notice pay = £400 x 4 = £1,600.
Notice pay should always be shown as a separate line in your settlement agreement to avoid confusion on tax and entitlements.
If your pay varies, insist your employer explains how the average was computed—request the actual payslips and calculations for the averaging period to ensure accuracy.
See our client success stories for real examples of negotiated notice and settlement entitlements.
Payment in lieu of notice (PILON) and working your notice
Payment in lieu of notice (PILON) is when your employer ends your employment immediately and pays you for the notice period without requiring you to work it. PILON is now standard in many redundancy settlements to bring matters to a swift close—especially where both parties prefer immediate release, or for business or employee relations reasons.
The PILON sum must equal what you would have earned had you worked your full notice period (including salary, guaranteed bonuses, allowances). This is separate from redundancy pay or other compensation sums. Where PILON is not written into your contract or is not specifically agreed, tax treatment or enforceability may differ—see below for tax.
Alternatively, employers may require you to work your full notice, in which case you receive normal pay in the usual way up to your leaving date. Hybrid arrangements are also possible, with part-worked, part-paid notice.
Your contract entitles you to three months’ notice. Your employer gives immediate notice with payment in lieu of three months’ salary and benefits, so your end date is brought forward but pay for the full notice period is preserved.
For further information on PILON and redundancy exits, see our performance, capability & disciplinary exits guide or official ACAS settlement agreement guidance.
If you want clarity on whether you should receive PILON or work your notice—and how this affects your payout—call our settlement agreement solicitors on 0800 054 1144, or book your settlement agreement advice online for a same-day appointment. Our advice is free to you as the employer pays our fees.
Tax treatment of notice pay vs redundancy payments
Notice pay is almost always taxable as employment income. It is subject to Income Tax and National Insurance via PAYE, as if you had remained an employee throughout your notice period. This is true whether you work your notice or receive PILON. The only exception is where notice is genuinely worked and paid as regular salary, but in practice, payment in lieu is most often applied in settlements.
Redundancy pay, by contrast, is subject to different tax rules: the first £30,000 of genuine redundancy or ex gratia compensation is tax-free under s.403 Income Tax (Earnings and Pensions) Act 2003. However, HMRC requires employers to assess notice pay—it cannot be disguised as part of the £30,000 exemption. Instead, “post-employment notice pay” (PENP) rules mean that notice pay is always taxed.
| Payment Type | Tax on First £30,000? | National Insurance? | PAYE Deducted? |
|---|---|---|---|
| Notice pay (PILON/Worked) | Taxable from £1 | Yes | Yes |
| Statutory redundancy pay | No | No | No (until over £30,000) |
| Ex gratia (compensation) | First £30,000 tax-free | No (up to £30,000) | Only over £30,000 |
This distinction is critical in settlements, to avoid HMRC challenge or unexpected tax bills. Errors in notice/tax allocation can also affect Universal Credit or benefits.
Always check that your settlement agreement shows notice pay as taxable and redundancy pay/ex gratia separately, to avoid underpaying tax or breaching your obligations.
For a more detailed explanation, see HMRC’s taxation of settlement agreements guidance or our settlement agreement advice page.
Is notice pay taxable? (PENP, £30,000 exemption, PAYE obligations)
In nearly all redundancy settlements, notice pay is taxable in full, regardless of whether it is paid as PILON or for working notice. The £30,000 tax-free exemption does NOT apply to notice pay; HMRC treats both worked and PILON notice as normal employment income (unless the payment is earned entirely after your employment ends and is not for notice).
Post-employment notice pay (PENP) rules require employers to calculate the amount of your entitlement, deduct PAYE tax and National Insurance on it, and pay you the net balance. Only genuine ex gratia redundancy or settlement payments can attract the £30,000 exemption.
If your notice pay entitlement is £5,000, all £5,000 will be taxed via PAYE. If your redundancy pay is £10,000 and you have a further ex gratia sum of £25,000, the first £30,000 of the redundancy and ex gratia are tax free, but all £5,000 of notice pay remains taxable.
See HMRC’s termination payments and tax overview for more information on this complex area.
Notice pay, holiday pay, and other final amounts in your settlement calculations
Notice pay is only one element of your total final settlement. Other statutory and contractual entitlements may include accrued but untaken holiday pay, unpaid salary, bonus entitlements, outstanding expenses, or other agreed sums. Your settlement agreement should break down each component for clarity and compliance with both legal and HMRC expectations.
Holiday pay is always paid in addition to your notice pay; it cannot be subsumed or set off against it. Employers must calculate and pay for all accrued but unused statutory holiday up to your termination date. Some employers try to limit or reduce holiday pay—this is unlawful unless you have already taken all your entitlement.
An accurate final payout is where notice pay, redundancy pay, holiday pay and any ex gratia or discretionary sums are each specified and calculated correctly for tax and compliance.
Cross-check your settlement agreement against your holiday records and recent payslips—mistakes in holiday accrual or under-calculation of notice pay are common, especially where employment has varied over time.
See our guidance on unfair dismissal if you suspect you have been pressured into an agreement or your rights have not been respected.
Do you get holiday pay on top of notice pay?
Yes, you are legally entitled to be paid for any untaken, accrued holiday up to your leaving date, in addition to your notice pay. This applies whether you work your notice or are paid in lieu. Holiday pay must be calculated in line with your usual daily or weekly rate and shown as a separate payment in your settlement agreement.
Employers must also pay for any public holiday entitlement not taken, if provided for in your contract. The only exception is where holiday has already been fully taken.
If you are owed three weeks’ notice pay and have five days of accrued but untaken holiday, you will receive both three weeks’ notice pay and five days’ holiday pay—both as distinct, itemised payments.
Read more in our redundancy expertise and the official government guide to notice and holiday entitlements.
Check your settlement agreement calculation for errors
It is crucial to thoroughly check your settlement agreement calculations for accuracy before signing. Common mistakes include underpayment of notice (using the wrong notice period or pay rate), missing holiday accrual, omitting regular benefits, or including PILON without applying correct taxation (PENP). Discrepancies could leave you significantly out of pocket or at risk of HMRC investigation.
A step-by-step check should cover: (1) correct notice period used; (2) pay rate and all allowances included; (3) holiday entitlement up to termination; (4) itemised, separated payment sums; (5) proper tax applied to each element; and (6) agreement checked by our solicitor.
Do not resign before you have checked your settlement agreement calculation with our solicitor—resigning early may affect your entitlement to the correct notice pay or redundancy package.
Use our settlement agreement calculator to estimate your likely payout before agreeing terms.
If you would like our solicitors to review your settlement agreement and notice pay calculation before you sign, you can call us free on 0800 054 1144 or book your settlement agreement advice online. The process is always free for employees, as the employer pays our fees.
Risks and key clauses to review in your settlement agreement
Settlement agreements include a range of key terms and clauses that can impact your post-employment rights and financial security. The most important areas to check are:
- Restrictive covenants: These may limit your ability to work for competitors or solicit clients. Check wording for duration and reasonableness. Negotiation may be possible.
- Confidentiality/non-disclosure: Most agreements require you to keep terms confidential. Understand what is covered and any exceptions.
- Reference clause: The form and content of any reference your former employer will provide—try to have this agreed and attached as a schedule.
- Tax indemnity: Settlement agreements routinely include a clause where you promise to pay any future HMRC tax or NIC if HMRC claims further sums are owed. This can be risky if calculations are wrong.
Every clause should be checked by our solicitor to ensure it properly reflects your interests and does not go beyond what is needed for a fair settlement. Some employers include additional or unusual obligations which are negotiable.
A redundancy settlement agreement included a wide-ranging non-compete clause preventing the employee from working in the sector for two years. Our solicitor successfully negotiated a reduction to six months, enabling the employee to take on fresh work much sooner.
If you are unsure whether restrictive covenants, confidentiality, or reference terms are fair, see our specialist settlement agreement advice.
Restrictive covenants and post-employment restrictions
Restrictive covenants can limit your ability to work in your sector, contact clients, or start a competing business after leaving. In redundancy settlements, employers often include these to protect business interests. You should always check if the restriction is broader than strictly necessary—for example, does it bar you from all roles, or only senior/competing ones? Is the time period excessive (e.g. more than six months)?
Such clauses are only enforceable if reasonable to protect legitimate business interests. Our solicitor can advise you whether a particular clause is likely to be unreasonable or unenforceable and, if appropriate, can seek to renegotiate the scope or duration.
Never accept a new or extended restrictive covenant in a settlement agreement without checking with our solicitor—these can have a lasting impact on your career and may be open to negotiation.
Find out more about negotiating restrictions in our client success stories.
Confidentiality and NDA terms
Most redundancy settlement agreements include confidentiality or non-disclosure terms (NDAs), obliging you to keep the agreement’s terms secret. Review carefully: does the obligation apply to everything, or only the financial aspects of the agreement? Are you allowed to discuss your departure with your family, advisers, or new employers?
Sometimes, carve-outs are agreed so you can disclose for legal or tax advice, or to HMRC or regulatory bodies. Failure to comply could result in repayment of settlement monies.
A settlement agreement initially prohibited any disclosure, even to family or future employers. After review, our solicitor negotiated a carve-out for immediate family and permitted disclosure when applying for new roles, preventing practical difficulties.
See more about confidentiality clauses in our settlement agreement advice and ACAS guidance on settlement agreements.
Reference clauses and wording
A carefully drafted reference clause in your settlement agreement is important, especially in redundancy scenarios where reputational concerns may arise. Aim to agree the exact wording of your reference, or at least the nature of information to be provided, and have this set out as a schedule to the agreement.
Employers may agree to a factual or more personal reference, depending on circumstances. Always confirm the company will comply with this upon request and that no damaging statements are included.
Insist that the settlement agreement specifies the reference wording or at least the key information to be disclosed—do not rely on vague assurances that a reference “will be given” without detail.
See successful reference negotiation examples at our client success stories page.
Tax indemnities and repayment obligations
Settlement agreements generally contain a tax indemnity clause, which means if HMRC later claims further tax or National Insurance is due on any sums paid, you must repay the employer or settle the liability. This makes precise calculation and proper drafting essential, especially with notice pay and redundancy payments.
Before signing, ensure notice pay has been taxed via PAYE and is not incorrectly bundled with redundancy (which is eligible for part tax exemption). If a repayment or indemnity clause is unfairly broad, our solicitor will seek to limit its effect or clarify who is liable under which circumstances.
A settlement agreement required the employee to repay all settlement sums if HMRC recategorised notice pay. After legal challenge, the wording was amended to limit liability only to tax on the PILON, not the entire sum, reducing risk and exposure.
Learn more about tax indemnities at our settlement agreement advice page or the gov.uk tax treatment of termination payments.
Step-by-step: How to review and sign your redundancy settlement agreement
To ensure your interests are fully protected and that your notice pay and settlement amounts are correctly handled, follow this step-by-step process:
- Obtain the draft settlement agreement and any breakdown of proposed payments from your employer.
- Review your employment contract and payslips to identify your correct notice entitlement and “week’s pay”.
- Check that notice pay, redundancy pay, holiday pay, and any discretionary or ex gratia payments are clearly itemised.
- Confirm the tax treatment of each amount: notice pay is taxable, redundancy pay may be tax free up to £30,000.
- Schedule an appointment with our solicitors for independent legal advice—our solicitor will review the agreement, explain its effect, and ensure your rights are protected.
- After our solicitor is satisfied and you understand fully, sign the agreement and return it to your employer. We will issue the ILA certificate to make your settlement legally binding.
- The employer will process payment and issue your P45.
Our process is fully remote, with same-day appointments and no cost to employees as the employer pays our fee.
Bring your latest payslips, contract, and any relevant emails to your ILA appointment—having these to hand ensures we can check for underpayments or missed entitlements on the spot.
For a full overview of our process, visit our book ILA online page.
The remote, same-day advice process for employees
Our firm specialises in providing fast, remote, SRA-regulated independent legal advice for settlement agreements. The process is streamlined and convenient:
- Book your appointment online or by phone.
- Upload your agreement and supporting documents (payslips, contract).
- Attend a confidential video or phone meeting—our solicitor reviews your entire agreement, checks all sums and clauses, and answers any questions.
- Receive advice and, if you proceed, our solicitor issues the ILA certificate and informs your employer.
- Payment for the advice is claimed from your employer; you pay nothing.
Most appointments are completed same-day, with documents signed and returned to your employer by the next working day.
An employee facing redundancy was able to upload the agreement and arrange a solicitor consultation during their lunch break. Their settlement was checked, errors corrected, and the ILA certificate issued within two hours—payout processed that week, with no personal cost.
See our client stories for more remote advice success scenarios.
Why Choose Settlement Agreement Lawyers?
Choosing Settlement Agreement Lawyers guarantees your redundancy settlement, including notice pay, is scrutinised and negotiated by highly experienced, SRA-regulated solicitors. We specialise exclusively in settlement agreements, redundancy pay and employer-employee negotiations, so we spot errors and potential value that others may miss.
Our service is rapid, wholly remote, and cost-free to employees—your employer pays our capped legal fees. We ensure every clause, calculation, and payment is accurately checked, from contractual and statutory notice pay through to tax treatment and reference wording. Our success stories reflect hundreds of successful outcomes for employees in all industries and at all levels.
- SRA-regulated solicitors—specialists in settlement agreements and redundancy law.
- No upfront costs for you—employer funds your advice.
- Rigorous, same-day review and negotiation.
- Clear, practical guidance through each step.
Many employees underestimate their notice pay or miss errors which cost them money. Secure your position by entrusting your agreement to our specialist solicitors—from initial check to binding signature.
To find out how we can help you with your redundancy settlement and notice pay, and to ensure your employer is meeting all obligations, call us on 0800 054 1144 or book your settlement agreement advice online. There is never any charge for employees—the employer pays our fee.
Frequently Asked Questions About How Notice Pay Is Calculated in a Redundancy Settlement
How do I check if my notice pay calculation is correct?
You check your notice pay by comparing your entitlement (the greater of your statutory or contractual notice period) and multiplying it by your usual weekly pay, including regular allowances. Request a full payment breakdown, check each figure, and ask our solicitor to review before signing your agreement.
Is notice pay included in a redundancy settlement agreement?
Yes, notice pay is usually included in a redundancy settlement agreement, either as a line item or within an overall sum. It should be clearly itemised and its tax status, period covered, and amounts specified to avoid later disputes.
Is notice pay always taxable in redundancy settlements?
Notice pay is nearly always taxable under PAYE. The £30,000 tax-free exemption does not apply to notice pay—HMRC classifies it as employment income, whether paid as PILON or for worked notice, so tax and NIC are deducted before payment.
What is the difference between redundancy pay and notice pay?
Redundancy pay compensates you for the loss of your job due to redundancy under statutory rules, and may be partly tax free. Notice pay compensates you for the agreed period between dismissal and employment ending; it is always taxed as normal pay.
Can I negotiate a higher notice pay figure in my settlement agreement?
You may be able to negotiate a higher notice payment, for example by agreeing to receive a longer notice period or an enhanced settlement sum in lieu of notice. Our solicitors can advise on tactics for negotiation and will check if such increases affect tax status.
Does notice pay include bonuses and commission?
Notice pay should include contractual bonuses and regular commission where these form part of your normal pay. Discretionary or ad hoc bonuses typically are not included unless specified in your contract or the settlement agreement.
What happens if I have variable hours or pay?
For variable hours, your “normal pay” is typically calculated as your average pay over the 12 weeks before redundancy. This ensures fairness and is required under the Employment Rights Act 1996 for statutory notice pay calculations.
How do holiday pay and notice pay interact in a redundancy settlement?
Holiday pay and notice pay are separate entitlements. You are entitled to payment in lieu of accrued but untaken holiday in addition to your notice pay. Both should be shown individually in your settlement agreement and calculated on your normal rate of pay.
Book Your Free Redundancy Notice Pay Review
Understanding how notice pay is calculated in a redundancy settlement is crucial to making sure you receive everything you are entitled to—whether your rights arise from statute or contract, and whether your notice is worked or paid in lieu. This article explains in clear terms how employers should work out your notice pay, what counts as normal pay (including allowances and commission), how tax must be handled, and the importance of having the correct figures detailed separately in your settlement agreement. Common mistakes and risks are highlighted, so you can safeguard your position before you sign.
Our solicitors specialise exclusively in settlement agreements and redundancy law, providing rigorous, SRA-regulated advice with no cost to you—the employer covers all fees. With same-day, fully remote appointments, our solicitors ensure every detail of your agreement is checked, any errors are caught, and your legal rights and tax position are secured.
For peace of mind and a quick, expert review of your notice pay calculation, call Settlement Agreement Lawyers today on 0800 054 1144 or book your settlement agreement advice online for a same-day remote ILA appointment.
