Growth and Skills Levy 2026: How redundancy, redeployment, and settlement agreements change for tech, construction, and engineering workers

Key Takeaways

• The 2026 Growth and Skills Levy affects redundancy and settlement offers by making employers consider retraining and redeployment options before finalising financial packages for tech, construction, and engineering workers.
• If you face redundancy under the new levy rules, you may be offered levy-funded retraining instead of or alongside a traditional ex gratia settlement payment.
• Employers who fail to properly consult or consider alternatives such as redeployment or levy-funded training could face unfair dismissal or discrimination claims.
• Our solicitors provide expert legal advice on your redundancy rights, how the Growth and Skills Levy 2026 impacts your settlement agreement, and help maximise your exit package including tax-free elements.
• Independent legal advice from our SRA regulated solicitors is essential before signing a settlement agreement, as it makes the waiver of claims legally binding under s.203 Employment Rights Act 1996.
• For most employees, our service is completely free because employers typically cover all legal fees relating to settlement agreement legal advice in England.
• Our solicitors offer same-day remote appointments across the UK with over 1,400 five-star reviews on Trustpilot, Google, and other platforms.
• Early legal review gives you the best chance to negotiate a stronger financial settlement or retain access to valuable training, so contact us before agreeing to any redundancy or redeployment offer.

How the 2026 Growth and Skills Levy affects redundancy and settlement offers for tech, construction, and engineering workers

If you work in tech, construction, or engineering and face redundancy or a settlement agreement, it’s vital to understand how the 2026 Growth and Skills Levy affects redundancy and settlement offers in your sector. Under these new rules, employers must consider levy-funded retraining and redeployment before finalising redundancy payments or settlement terms, and any settlement agreement you sign is only legally binding if you receive independent legal advice—almost always paid for by your employer.

Before you accept an exit package, remember that your employer’s offer may now include options like reskilling or levy-funded apprenticeship units as well as, or instead of, traditional redundancy compensation. Getting the right legal advice is non-negotiable—not just to meet the legal requirement, but to ensure your payout is fair and any tax implications are properly handled, especially with these new skills funding choices.

In this article, you’ll learn how the Growth and Skills Levy 2026 reshapes redundancy rights, redeployment, and settlement negotiations for workers in tech, engineering, and construction, and why clear legal advice is essential for protecting your position. For fast, expert help, you can call our solicitors on 0800 054 1144 or book your settlement agreement advice online.

How the 2026 Growth and Skills Levy affects redundancy, redeployment, and settlement agreements for tech, construction, and engineering workers

The Growth and Skills Levy 2026 is a new statutory requirement replacing the Apprenticeship Levy from April 2026, fundamentally altering the training and redundancy landscape in England & Wales. Unlike the Apprenticeship Levy, which was limited to funding qualifying apprenticeship training, the Growth and Skills Levy broadens the scope to include reskilling, digital competencies, and sector-specific upskilling. For the tech sector, this means an increased focus on AI and digital transformation training. In construction and engineering, the new levy is layered over existing levies such as the ECITB, integrating with wider government-backed initiatives to futureproof essential skills.

Levy funds continue to expire if unused (typically after 24 months), but new 2026 rules tighten co-investment: employers who fail to spend levy funds on workforce retraining will now have less flexibility to defer, ramping up cost pressures as expiry dates loom. This has prompted some organisations to accelerate redundancy consultations when eligible staff cannot be upskilled quickly enough, while others may push redeployment or mixed compensation-and-training settlement structures to mitigate costs.

Legally, employers are required to consult affected workers, identify suitable alternative roles, and consider retraining offers funded by the levy before selecting redundancy. Failure to follow such steps risks claims for unfair dismissal, especially for employees in protected categories under the Equality Act 2010. For redundancy to be lawful, the business case must not only justify job losses but also evidence meaningful consideration of redeployment and sector-relevant reskilling pathways. This can impact the content and negotiation of settlement agreements in tech, construction, or engineering roles. For further official policy and guidance, review gov.uk’s redundancy advice for employees.

Why is independent legal advice (ILA) required for settlement agreements under s.203 Employment Rights Act 1996?

Section 203 of the Employment Rights Act 1996 sets out the statutory requirement for employees in England & Wales to obtain independent legal advice (ILA) before a settlement agreement can lawfully waive statutory claims such as unfair dismissal or discrimination. This protects employees from inadvertently signing away important rights—without ILA, a settlement agreement is not legally binding, and the employer remains exposed to future tribunal claims.

By getting ILA, you ensure you fully understand what rights you are giving up, the terms of your agreement, and any restrictions or tax consequences attached. Risks of signing without advice include enforcibility failures (the agreement may not hold up in a tribunal), permanent loss of the right to bring claims for unfair dismissal or discrimination, and being left unprotected against future disputes.

For employees, the service is typically free, as employers almost always cover our solicitors’ capped ILA fees—see our free funding information. The Growth & Skills Levy 2026 has prompted new terms to appear in settlement agreements, including hybrid packages (part compensation, part retraining), retraining eligibility or obligations to consider redeployment. These clauses add complexity, especially regarding your tax position and the scope of any waiver—highlighting the need for fully informed independent legal advice.

You can find the full legislative requirements in Employment Rights Act 1996 s.203, and further practical detail in our settlement agreement advice guide.

Is your redundancy or settlement offer fair under the Growth & Skills Levy rules?

To decide if your redundancy or settlement offer is fair from April 2026, apply this checklist:

1. Has your employer followed a genuine consultation process?
2. Has there been a fair and transparent selection for redundancy?
3. Were you offered any suitable alternative roles or retraining paid for by the Growth and Skills Levy, ECITB levy, or similar?
4. Does your agreement clearly state the compensation amount, any retraining terms, and your rights regarding both?
5. Have you received or been offered independent legal advice funded by your employer?
6. Are all statutory payments (notice, holiday, redundancy pay) appropriately included and calculated?
7. Has the employer’s levy fund status or looming expiry influenced your offer? If so, can this be used as leverage for a better deal?

Here’s how typical settlement terms compare:

If an employer’s levy fund is about to expire, they may be more willing to negotiate higher lump sums or offer enhanced retraining to avoid losing their unused funds. Employees should openly question how the levy affects their offer—using our settlement agreement calculator can help benchmark. Official government redundancy guidance can be found on gov.uk redundancy rights.

If you’ve received a redundancy or settlement offer and want to ensure you are not losing out under the Growth & Skills Levy rules, call our settlement agreement solicitors on 0800 054 1144 or book your settlement agreement advice online. Advice is free for employees—your employer pays our fees, and appointments are available remotely and at short notice.

Tax on redundancy and settlement payments after the 2026 Growth and Skills Levy

Under current and future rules, the first £30,000 of compensation for loss of employment is tax-free, as per HMRC and gov.uk redundancy payout tax guidance. The exception is payments representing contractual rights—such as notice pay (PENP: Post-Employment Notice Pay) and holiday pay—which remain fully taxable and subject to National Insurance.

With the 2026 Growth and Skills Levy, hybrid settlements—mixing compensation with retraining—raise complex new questions. Retraining funded directly by the employer through the levy or sector funds (e.g., ECITB) will generally be non-taxable if it is not convertible to cash and is genuinely for approved reskilling. However, training allowances or vouchers that could substitute for cash might become taxable income, so careful drafting is essential in your settlement agreement to avoid accidental liabilities.

To maximise your tax-free entitlement:

1. Ensure any compensation for loss of office is clearly distinguished from taxable notice and holiday pay.
2. Confirm the source, scope, and format of retraining funding in your agreement.
3. Request confirmation that employer-funded training does not reduce your tax-free lump sum.
4. Use the redundancy calculator to check your estimated entitlements.

Financial structure, timing, and language in your agreement all matter. For additional details, refer to gov.uk: tax on termination payments and our own settlement agreement advice resources.

Key clauses and risks in settlement agreements affected by levy-driven redundancies

Settlement agreements in the era of the Growth and Skills Levy must now address more varied and complex terms. Of particular importance:

• Restrictive Covenants: Limit your work for competitors or clients, now sometimes extended to roles following retraining.
• Confidentiality: Includes not disclosing redundancy reasons or levy-driven compensation/retraining details—critical in sensitive tech and engineering fields.
• References: Clauses may now specify references post-retraining or redeployment, vital for sector mobility.
• Tax Indemnities: With hybrid settlements, employees may be asked to indemnify employers if a tax error arises—legal advice is vital before signing.
• Full Waivers: Growing trend to request waivers of not just existing claims, but future disputes arising from retraining, redeployment, or retraining packages.

Unique risks following the 2026 reforms include whether declining an offered retraining package could prejudice your compensation or legal rights, and whether the breadth of your waiver extends to future claims during sector-based upskilling. Make sure all such clauses are individually explained by our solicitors—especially if you are moving between regulated or safety-critical construction and engineering roles.

See further unfair dismissal guidance and ACAS’s official settlement agreement code of practice.

If you have been offered a settlement agreement and want specialist advice on clauses affected by the new Growth and Skills Levy, call our settlement agreement solicitors on 0800 054 1144 or book your settlement agreement advice online. You can access free remote appointments because employers pay our solicitor fees.

The settlement agreement signing process step by step — what to expect

If you are facing a redundancy settlement or redeployment under the new Growth and Skills Levy, expect this 5-step process:

1. Offer Stage: Receive a written settlement agreement (including compensation, retraining, or redeployment terms). Do not sign or resign yet.
2. Legal Review: Contact us to book ILA online—our solicitors review your agreement (remote appointments typically within 24–48 hours).
3. Negotiation: We advise you on fairness, recommend improvements, and if needed, negotiate with your employer about compensation, levy-funded retraining, or alternative employment.
4. Signing and ILA Certificate: Once you are satisfied, both you and our solicitor sign, and we issue the mandatory ILA certificate to your employer.
5. Payment and Access: Compensation is paid (and retraining commenced if agreed) within the timescales set out—often 7–14 days after signing.

To streamline the process, gather your current contract, any at-risk or consultation correspondence, a copy of the draft agreement, and evidence of alternative roles or retraining offers relevant to your sector (see our workplace grievance resources). Tech, construction, and engineering employees should particularly flag any sector-specific requalification or safety requirements in their review.

Why Choose Settlement Agreement Lawyers?

By instructing our solicitors, employees in the tech, construction, and engineering sectors benefit from a fully SRA-regulated, sector-expert service at no personal cost. Your employer pays our capped fees, so you have free, specialist advice whether you want to accept, negotiate, or challenge a settlement agreement—we handle everything remotely, same day wherever possible.

Our negotiation-first approach is proven through our client success stories, achieving enhanced compensation, reduced restrictions, and better sector mobility for employees affected by redundancy or retraining under the new Growth and Skills Levy. You can also learn more about free funding at our dedicated funding page and how we help with immediate booking for ILA.

Frequently Asked Questions About the Growth and Skills Levy 2026 and Redundancy Settlement Agreements

How does the 2026 Growth and Skills Levy differ from the Apprenticeship Levy?

The 2026 Growth and Skills Levy has a broader remit, covering a much wider range of reskilling and upskilling, not just apprenticeships. It affects more roles across tech, construction, and engineering and means employers have further obligations to fund retraining before making redundancy decisions.

Will I be offered retraining before being made redundant?

Yes. Under Growth and Skills Levy rules, employers should actively consider and offer retraining or redeployment via levy funds before making you redundant. If they do not, the redundancy could be open to legal challenge. Request evidence of what options were explored.

Are retraining and upskilling funded by the levy taxable to me?

Generally, no. Employer-funded retraining using the Growth and Skills Levy or ECITB will not be taxable for employees if it is delivered directly and cannot be redeemed as cash. However, care must be taken to ensure any training allowances or vouchers are properly structured.

What if my employer’s levy funds are about to expire—can I get a better deal?

Yes. If your employer’s levy funds are close to expiring, they may enhance your financial offer or prioritise retraining to avoid losing the funds. This can improve your negotiating position; use our settlement agreement calculator to support your case.

Can I refuse retraining and still claim redundancy pay?

You can refuse retraining, but this may impact your right to redundancy pay if the offer was deemed reasonable and suitable for you. This assessment is fact-specific, and our solicitors can review your case to help you understand your rights.

Does my settlement agreement need to mention the Growth and Skills Levy?

If retraining or reskilling forms part of your exit package, your settlement agreement should clearly reference the source of funding and the terms involved. Our solicitors ensure your agreement is watertight and that all obligations and tax implications are fully covered.

What should I bring to my ILA appointment?

Bring your draft settlement agreement, your contract of employment, redundacy consultation documents, and details of any retraining or redeployment offers. For sector-specific advice, include evidence of your professional qualifications or recent courses.

How do I book a same-day settlement agreement review?

To arrange a same-day remote review, book your ILA online or call our solicitors at 0800 054 1144. We aim to review your settlement offer and provide your legally compliant ILA certificate within 24–48 hours, all at no cost to you.