Key Takeaways
- Your payout for redundancy may include statutory redundancy pay, notice pay, plus enhanced or ex gratia amounts depending on your contract and negotiation.
- Statutory redundancy pay depends on your age, length of service, and weekly pay cap, with maximum limits set annually by the government.
- Enhanced or contractual redundancy pay can increase your payout for redundancy above the legal minimum if negotiated successfully.
- The first £30,000 of redundancy pay is usually tax-free; notice pay, PILON, and unused holiday pay are taxed as earnings.
- Our solicitors help you negotiate a higher redundancy payment, check for hidden claims, and structure your payout for tax efficiency before you sign anything.
- Signing a redundancy settlement agreement waives rights like unfair dismissal claims, so our SRA regulated solicitors provide the required independent legal advice—usually at no cost to you.
- Employers usually pay all legal fees, so you benefit from free, same-day remote appointments with our expert redundancy solicitors.
- Settlement Agreement Lawyers are rated Excellent with over 1,400 five-star reviews on Trustpilot, Google, and other trusted platforms.
Payout for redundancy: what are you entitled to and can you negotiate more?
Facing redundancy in England or Wales? Your payout for redundancy might be larger than you think. It isn’t limited to just the statutory minimum. Depending on your contract, your employer’s policies, and your negotiation, you could be entitled to statutory redundancy pay, enhanced or contractual redundancy pay, notice pay, holiday pay, and often an additional ex gratia settlement. Before signing any agreement, you must take independent legal advice—this is a legal requirement under the Employment Rights Act 1996 and employers almost always cover your solicitor’s fees, making our support free for you.
It’s crucial to get advice before accepting any settlement. Once you sign a redundancy settlement agreement, you waive your right to bring claims such as unfair dismissal or discrimination, making it essential our solicitors check your offer is fair, identify all entitlements, and negotiate for more if possible. Book a same-day appointment with our solicitors on 0800 054 1144 or book online to maximise your payout for redundancy.
Payout for redundancy: what do you get and can you increase your total?
Redundancy can be uncertain, but knowing the components of your payout for redundancy is vital. In England and Wales, your payout can include statutory redundancy pay, enhanced or contractual redundancy pay, notice pay, payment in lieu of notice (PILON), accrued holiday, and any further ex gratia settlement sums. All of these may be negotiated.
A settlement agreement is a legally binding document that usually involves you waiving various employment claims in exchange for a financial package, which our solicitors may be able to negotiate upward depending on your circumstances. This agreement covers not just your payout, but also reference provision, confidentiality, future restrictions, and more.
Jane, a marketing manager with eight years of service, was offered only statutory redundancy and notice pay. With our advice, she negotiated an enhanced settlement that recognised her skills and service, securing a payout far higher than the employer’s first offer.
If you have been offered redundancy, call us on 0800 054 1144 or book your settlement agreement advice online for expert, same-day support from our solicitors.
What counts as redundancy pay, and who is eligible?
Redundancy pay covers all sums given due to your redundancy—including statutory and enhanced redundancy, notice, PILON, holiday, and settlement sums. You must have at least two years’ continuous employment to qualify for statutory redundancy pay, and your dismissal must be a genuine redundancy under the Employment Rights Act 1996. Some employees, such as civil servants, may have separate schemes.
Only employees (not workers or freelancers) with two years of service qualify. If offered a settlement agreement, all elements—redundancy, compensation, and ex gratia—can be combined in a tax-efficient way.
Request a detailed breakdown of everything offered. Our solicitors often spot underpayments or missing elements that can be used to negotiate a higher payout for redundancy.
Statutory redundancy pay: what it is and how much you can get
Statutory redundancy pay is the legal minimum for eligible employees with two or more years’ continuous service. The calculation factors in your age, years worked (capped at 20), and weekly pay (capped at £643 as of April 2024):
- 0.5 week’s pay per year under age 22
- 1 week’s pay per year from age 22 to 40
- 1.5 week’s pay per year aged 41+
If your weekly pay exceeds the cap, the calculation uses the cap. Statutory redundancy pay is added to your notice and holiday pay.
You can quickly estimate your payout using our Settlement Agreement Calculator or the gov.uk redundancy pay calculator.
Ali, aged 46, earned £700/week with 12 years’ service. He received 18 weeks’ statutory redundancy pay, but calculations used the £643 cap—entitling him to £11,574, not his actual wage.
Enhanced and contractual redundancy pay explained
Many employers offer more than the statutory minimum, either as a contractual right, via a staff policy, or following negotiations. Enhanced redundancy pay may provide extra weeks’ pay, less restrictive caps, or ex gratia sums. Enhanced terms are often used to resolve claims or encourage a smooth exit.
Whether you are entitled depends on your contract, employer policies, or custom and practice. These enhanced terms can frequently be increased through negotiation, especially for senior or long-serving employees or where there’s a risk of legal claims.
If other employees have received more, or if your employer has a published redundancy policy, mention this in negotiations. It’s powerful leverage for securing a larger payout for redundancy.
Other payments on redundancy: notice pay, PILON, holiday pay, ex gratia
Your redundancy payout may also include:
- Notice pay (worked or PILON)
- Accrued (unused) holiday, paid at your normal rate
- Ex gratia sums—additional discretionary payments, often as part of a negotiated settlement
Each must be itemised for tax and legal reasons. Employers often use settlement agreements to wrap all these up and secure a legally effective waiver of claims.
Ravi received statutory redundancy, £2,800 PILON, one week’s accrued holiday pay, and a £15,000 ex gratia settlement for giving up claims—substantially increasing his total package.
Why do I need independent legal advice on a redundancy settlement agreement?
You must take independent legal advice before signing a settlement agreement, or it is not legally binding, and your employer will not pay out. The law (section 203 Employment Rights Act 1996) requires this advice to ensure you knowingly give up rights in return for payment.
Our solicitors guide you through the agreement, check calculations, negotiate for you, and clearly explain your obligations. Employers cover the cost, so you have peace of mind that you won’t face a fee for our expert support.
Never verbally accept or sign a settlement agreement before you’ve had advice from our solicitors. Early advice preserves your rights and strengthens your negotiating position.
The legal requirement: section 203 Employment Rights Act 1996
Section 203 Employment Rights Act 1996 states a waiver of statutory rights through a settlement agreement is only valid if the employee has received independent legal advice. Your adviser must be a qualified solicitor or similarly certified professional, and the agreement is not binding without this step.
Employers will not release your payout until your adviser has signed the certificate. Our solicitor handles this quickly for you, ensuring compliance and a stress-free process.
Tom could only finalise his redundancy payout once our solicitor provided the advisory certificate for his settlement agreement, satisfying the legal requirement.
When is legal advice mandatory, and who pays?
Legal advice is mandatory for all settlement agreements—redundancy-related or not. Without it, waivers of statutory rights have no effect. Your employer is required to pay a legal contribution so you do not face any bill for our ILA; our fee simply matches your employer’s contribution.
If the employer’s standard contribution is low, our solicitors can negotiate for an increased amount so you receive high-quality legal advice at no cost.
Check the settlement agreement for the specified legal contribution. If it does not cover our fee in full, we will ask your employer to increase it so you remain fully protected at no cost.
How is your redundancy payout calculated? (with worked examples and calculator)
Your redundancy payout calculation covers statutory and enhanced redundancy, notice, PILON, holiday, and any extra compensation. Employers can make mistakes or overlook important elements; all should be identified and cross-checked against your contract and the law.
For a quick figure, use our Settlement Agreement Calculator or see the gov.uk guide to redundancy pay.
Priya’s overall redundancy payout was £5,600 statutory redundancy, £1,800 PILON, £500 holiday pay, plus £2,000 extra for claim waiver—giving her a total materially above the minimum.
Statutory redundancy payout calculation step-by-step
A step-by-step statutory calculation:
- Count full years of service (max 20).
- Apply age multipliers: 0.5 week per year under 22, 1 week for 22–40, 1.5 weeks for 41+.
- Add the total weeks.
- Multiply by weekly pay (using the £643 cap as of April 2024).
- Check for any contractual enhancements.
Example: 12 years (age 46), weekly pay £700:
12 x 1.5 = 18 weeks, 18 x £643 = £11,574 statutory redundancy.
Confirm your continuous service date—TUPE moves and company changes rarely break service for redundancy pay, and this can significantly boost your payout.
Can you negotiate a higher redundancy payout?
You can almost always negotiate a higher redundancy payout, especially where there are potential claims (like unfair dismissal or discrimination), procedural errors, or the employer needs a speedy, risk-free outcome.
Negotiations can unlock additional sums, an improved reference, future restrictions, or even waiver of post-termination restraints. Our solicitors analyse your situation and get the best possible deal.
Lisa had evidence of a flawed redundancy process. Our solicitors secured an ex gratia payment of £10,000 above her initial statutory and notice pay by negotiating and highlighting legal risks to her employer.
What makes a redundancy payout fair or unfair?
A fair payout means you receive all your statutory and contractual rights, accrued benefits, and reasonable compensation for giving up legal claims. Unfair payouts typically involve miscalculated service, exclusion of benefits, or improper tax treatment.
Procedurally, fairness demands genuine consultation, fair selection criteria, and no discrimination. If your situation involves procedural unfairness or a potential legal claim, our solicitors can negotiate for an increased payout reflecting these factors.
Employers often present “standard” offers—never accept without considering your unique facts and seeking our solicitors’ advice on possible improvements.
If you’ve been offered redundancy or a settlement agreement, get clarity on your entitlements and negotiation options: call us on 0800 054 1144 or book online now.
Tax treatment: is your redundancy payout tax-free?
Statutory and most enhanced redundancy pay is tax-free up to £30,000. Payments for your notice (whether worked or as PILON) and accrued holiday are taxable as earnings. Ex gratia sums can also fall under the £30,000 exemption if structured correctly.
Each element should be clearly defined in your settlement agreement to optimise tax treatment and avoid future HMRC disputes. For up-to-date guidance see gov.uk redundancy pay and tax.
Anna’s payment included £13,000 statutory, £13,000 ex gratia, and £5,000 notice pay. The first £26,000 was tax-free; the notice pay was taxed as earnings.
Tax rules for statutory and enhanced redundancy pay
Statutory redundancy and most genuinely ex gratia sums up to £30,000 are tax-free. If you get both statutory and enhanced sums, these add together towards your £30,000 limit. Anything over this threshold becomes taxable, as do regular salary elements.
Contractual, expected, or salary-based redundancy payments are taxed as earnings, not ex gratia. Our solicitors structure settlement agreements for best tax effect, minimising unexpected deductions for you.
Make sure ex gratia payments are labelled and itemised separately—this maximises your tax-free sum and helps your employer comply with HMRC rules.
Tax on notice pay, PILON, holiday pay, and other termination payments
Notice pay (or PILON) and accrued holiday pay are always taxed as salary, regardless of whether you work your notice. Since April 2018, HMRC’s PENP rules ensure that all untaken notice is taxed, even if your contract says otherwise. Additional payments or company benefits also attract tax if they exceed the value of your tax-free entitlement.
Hasan’s redundancy included £6,400 PILON and £700 holiday pay—both taxed as earnings—while his £25,000 ex gratia was tax-free.
The £30,000 tax-free limit: how it works in practice
Your first £30,000 of genuine redundancy or ex gratia payments is exempt from income tax and National Insurance. Statutory and enhanced redundancy, plus discretionary settlement sums, are added together for this exemption. Any excess is taxed via PAYE. PILON, notice and holiday pay always remain taxable.
Our solicitors check the agreement is clear about each component and its tax treatment for your peace of mind.
Always review your final payslip and settlement breakdown. Our solicitors can resolve errors before you receive funds, avoiding possible HMRC issues later.
Key clauses and risks in a redundancy settlement agreement
Settlement agreements contain more than just payment details—clauses on post-employment restrictions, confidentiality, references, and tax indemnities can affect your future and carry risks. Our solicitors review every clause, explaining obligations and removing or improving any that are unnecessary or over-reaching.
A properly reviewed settlement protects you against future disputes and maximises both the value and security of your redundancy payment.
Simon’s draft agreement included a restrictive non-compete clause not found in his contract. We successfully removed it, keeping his career options open.
Restrictive covenants and post-termination restrictions
Settlement agreements often restate or expand on existing post-termination restrictions, sometimes making them tougher or longer. These clauses can block you from working in your sector, winning business, or contacting old clients.
Our solicitors check their fairness, proportionality, and likely enforceability, and push back on wider or harsher terms than necessary.
Never accept new or stricter post-employment restrictions without legal advice—these clauses can materially impact your next career move.
Confidentiality and non-disclosure terms
Confidentiality is standard in redundancy agreements. Often, you cannot reveal the financial package or even the reason for your departure. Sometimes, these terms are drafted too widely and could prevent you from explaining your situation to family, recruiters, new employers or professional advisers.
Our solicitors negotiate exceptions—so you keep your right to disclose necessary facts where appropriate.
Emily’s original clause prevented her discussing her departure; we negotiated wording allowing her to confirm she left by mutual agreement during recruitment.
References and agreed announcements
A positive or neutral reference is a crucial part of most settlement agreements following redundancy. Standard promises are sometimes too vague or allow negative feedback to future employers.
We negotiate agreed reference text or clear obligations so you can move on confidently.
Get your new reference in writing and attached to your settlement agreement, ensuring there’s no ambiguity.
Tax indemnities and repayment provisions
It’s common for agreements to contain clauses making you liable for any tax HMRC later claims on your payout. If carelessly drafted, these may expose you to risks beyond your control.
Our solicitors scrutinise these provisions, remove or limit them, and ensure the employer’s obligations are clear.
Jessica almost accepted a clause making her liable if her employer made a tax error. After our review, the employer’s responsibility was clarified and her risk removed.
If you’re considering a redundancy settlement or want your payout reviewed, call us on 0800 054 1144 or book a free advice appointment—your employer pays our fee.
What is the process for signing a redundancy settlement agreement?
The process begins with your employer making a written offer (after consultation). You gather your contract, redundancy letter, and payslips, then contact our solicitors for a same-day review by phone or video. We identify errors, negotiate where needed, and when agreed, you sign and receive our solicitor’s certificate. Payment is usually made within two weeks by BACS transfer.
Full procedural guide: see our Settlement Agreement Advice page.
Come to your advice appointment prepared with all employment and redundancy documents—our solicitors can give far more effective advice and find levers to raise your payout.
Step-by-step: from receiving your offer to getting paid
- Employer gives written offer/settlement agreement
- You gather documents and arrange our advice appointment (often same day)
- We review, advise, and negotiate for you
- Once agreed, you sign and our solicitor produces your adviser’s certificate for the employer
- Employer pays redundancy payout within 7–14 days
Jack secured and completed his settlement in eight calendar days thanks to prompt action and remote, same-day advice.
Remote, same-day advice and what documents you need
Our remote, nationwide service means you never have to visit an office. All work is done via email and phone or video. You’ll need:
- Draft settlement agreement
- Contracts and redundancy letters
- Recent payslips
- Evidence of enhancements, policies, or previous redundancy practices
We offer rapid appointments and can turn around most agreements in one business day.
Never feel pressured by a looming deadline. Employers routinely allow at least a week, so use that time to get proper, detailed advice from our solicitors.
Why Choose Settlement Agreement Lawyers?
We offer free, high-quality legal advice for redundancy settlement agreements nationwide in England and Wales. Your employer pays our fee, so you pay nothing, as described on our funding page. Our solicitors are SRA regulated employment law specialists with decades of experience, providing fast, practical advice and negotiating higher payouts. See our client success stories for genuine examples.
Remote, same-day appointments and regulated expertise take the hassle out of redundancy. We handle negotiation, certification, and all correspondence.
One client’s statutory offer was £11,000. With our advice and negotiation, their payout rose to more than £25,000 plus extended benefits.
Frequently Asked Questions About payout for redundancy
How much payout for redundancy am I entitled to?
Your payout for redundancy depends on your length of service, age, weekly pay (capped by the government), and any contractual enhancements. Use our Settlement Agreement Calculator or the gov.uk calculator for an accurate estimate.
Can I negotiate a higher redundancy payout?
Yes, it is usually possible to negotiate a higher redundancy payout, especially if you have potential claims or procedural concerns. Our solicitors can help identify leverage points and negotiate for extra sums or benefits.
Is redundancy pay always tax-free?
Statutory and most enhanced redundancy pay is tax-free up to £30,000. Notice pay, PILON, and unused holiday are always taxable as earnings, and amounts above £30,000 are also taxed.
What if my redundancy payout seems too low?
Ask your employer for a detailed breakdown and seek legal advice immediately. Our solicitors can spot miscalculations, missing components, or negotiation opportunities to maximise your payout before you sign anything.
Is a settlement agreement necessary for redundancy?
A settlement agreement is not legally required for all redundancies, but employers may offer one if they want you to waive legal claims. It’s essential to have independent legal advice to ensure your agreement is binding.
What is included in a redundancy payout package?
A typical redundancy payout includes statutory or enhanced redundancy pay, notice pay or PILON, holiday pay, and any ex gratia or negotiated settlement sums. Each should be itemised in your agreement for transparency and tax reasons.
How quickly will I receive my redundancy payout?
Once the settlement agreement is signed and our solicitor’s certificate is submitted, your employer typically processes payment within 7–14 days. Payment timings should be specified in your agreement.
What claims might increase my redundancy payout?
Potential unfair dismissal or discrimination claims, breaches of procedure, or failure to consult can provide grounds for securing a larger payout via negotiation. Our solicitors will advise on your specific leverage.
Knowing your rights and what makes up your payout for redundancy can make a real difference to your finances and peace of mind. Our solicitors ensure you receive all statutory and contractual sums, structure your agreement for tax efficiency, and negotiate for everything you are entitled to. Our independent legal advice is always free to employees as your employer pays our fee. For expert help maximising your payout and safeguarding your position, call Settlement Agreement Lawyers now on 0800 054 1144 or book your settlement agreement advice online for a same-day appointment.
