Key Takeaways
- Working out redundancy pay starts with understanding your legal entitlement to statutory redundancy pay if you have at least two years’ continuous employment.
- Statutory redundancy pay is calculated using your age, length of service, and weekly pay, with annual legal maximums.
- Enhanced redundancy pay may be available—check your contract or staff policies.
- The first £30,000 of redundancy pay is typically tax-free, but some payments (like notice pay) are taxable.
- Settlement agreements allow you to negotiate improved redundancy terms—our solicitors regularly secure higher or more tax-efficient packages.
- Independent legal advice from a solicitor is mandatory to make a redundancy settlement agreement legally binding; the employer almost always pays our fees.
- Our solicitors can review your settlement, ensure the offer is fair, and negotiate better terms in same-day remote appointments across the UK.
- We are rated Excellent by over 1,400 clients on platforms such as Trustpilot, Google, and more.
Working out redundancy pay: what to check before signing a settlement agreement
If you’re working out redundancy pay in England or Wales, it’s crucial to check your legal rights before you sign any settlement agreement. Independent legal advice is a requirement for these agreements to be valid. In almost all cases the employer pays for our solicitor’s advice, so this service is typically free for you.
Signing a settlement agreement waives your right to challenge the fairness of your redundancy, the amount of your redundancy pay, or related legal claims later. Our solicitors review every element—statutory, enhanced, and negotiated redundancy pay—optimise your tax status, and ensure the terms safeguard your interests before you commit.
This guide explains how redundancy pay is calculated, what enhanced pay and settlement agreements can mean for you, how tax affects your payment, and how to respond if your offer appears unfair. For clear, same-day help, call our solicitors on 0800 054 1144 or book your settlement agreement advice online.
For more details, visit Redundancy or check official redundancy pay guidance on gov.uk.
What is statutory redundancy pay and who is entitled?
Statutory redundancy pay is the minimum payment set by law for employees made redundant after two years’ continuous service. You must be an employee (not a worker or contractor), have at least two years’ service with your employer, and be dismissed for genuine redundancy—meaning your job no longer exists.
Redundancy applies to business closures, workplace shut-downs, or fewer employees needed for a particular kind of work. Agency staff and most contractors do not qualify for statutory redundancy pay. You will not be entitled to this pay if dismissed for gross misconduct or if you refuse a suitable alternative role unreasonably.
For a quick estimate, use our redundancy calculator or check gov.uk’s eligibility rules.
Statutory redundancy pay eligibility criteria
You qualify for statutory redundancy pay if:
- You have at least two years’ continuous employment with your employer.
- You are classed as an employee.
- The redundancy is genuine.
- You are not excluded (e.g. dismissed for misconduct).
Continuous service may include time transferred under TUPE regulations or certain breaks.
Check your status with gov.uk redundancy rights or consult our settlement agreement advice team.
How to calculate statutory redundancy pay (age bands, service, weekly pay)
Statutory redundancy pay takes into account age, length of service, and weekly pay (subject to a yearly cap). For each FULL year worked (up to 20 years):
- 0.5 week’s pay for each full year under 22
- 1 week’s pay for each full year aged 22–40
- 1.5 week’s pay for each full year aged 41 and above
Weekly pay is capped (£751 per week for redundancies after 6 April 2026), and only full years’ service count.
| Age in each year | Multiplier per year | Sample Calculation (6 years at £600/week) |
|---|---|---|
| Under 22 | 0.5 week | 2 x 0.5 = 1 week’s pay |
| 22–40 inclusive | 1 week | 3 x 1 = 3 weeks’ pay |
| 41 and over | 1.5 weeks | 1 x 1.5 = 1.5 weeks’ pay |
Try our redundancy calculator or use the gov.uk tool for your case.
Redundancy pay caps and maximum limits
Statutory redundancy pay cannot exceed the capped weekly pay limit (£751 after April 2026). The maximum statutory redundancy payment possible is £22,530 (i.e. 20 years x 1.5 weeks x £751).
Employers can pay above this, but not below. Ensure your payment is based on the correct cap year for your termination.
More detail at Employment Rights Act 1996 section 162 and gov.uk statutory figures.
If you need to make sense of your redundancy settlement agreement or check your redundancy pay, our solicitors provide a rapid, free review funded by your employer. We will challenge errors and negotiate better terms if appropriate, at no charge to you as the employee. Call 0800 054 1144 or book your settlement agreement advice online for a same-day appointment.
Do I need to get independent legal advice before signing a redundancy settlement agreement?
Yes—independent legal advice from a qualified solicitor is a legal requirement for settlement agreements to be valid. This protects your rights and ensures you understand what you are giving up and what you are receiving. The employer must pay or contribute to your legal costs for this advice.
If you sign without getting this advice, the agreement isn’t legally binding. You keep your rights but neither side gets the legal protection of a valid settlement. Our solicitors review every term and ensure you are not waiving important claims unfairly.
To organise your review, book your advice online or see ACAS’s guidance on settlement agreements.
s.203 Employment Rights Act 1996 explained: Why advice is mandatory
Section 203 of the Employment Rights Act 1996 mandates that an employee must consult a qualified, insured independent legal adviser before a settlement agreement is valid. This gives both parties certainty—no later claims can be brought if the legal steps are followed.
The employer pays the reasonable cost for your legal advice, and our solicitor provides you with the required certificate after the meeting.
Read more about your rights in our settlement agreement advice and check legislation.gov.uk – s.203 ERA 1996.
What happens if you sign without legal advice?
Without independent legal advice, the agreement is not enforceable. You may still bring tribunal claims for unfair dismissal, underpayment, or discrimination, and the employer cannot rely on the agreement to block your claim. You also risk not being able to enforce any above-statutory payments promised by the employer.
See ACAS guidance or book ILA online for more.
Is your redundancy pay offer fair? Statutory vs enhanced pay and how to compare
Many employers offer enhanced redundancy packages, going beyond the statutory minimum. Always check your contract, company redundancy policy, and past precedent. Enhanced redundancy might be a fixed formula (e.g. two weeks per year), a loyalty-based uplift, or a discretionary amount.
Compare both the statutory minimum and any enhanced package to ensure you’re not being underpaid. Some employers only offer the legal minimum; others are more generous. Never sign unless you are sure which applies.
Use our settlement agreement calculator or review client stories for real examples of improved redundancy deals.
Enhanced redundancy pay: contractual rights and company policies
Enhanced redundancy pay, found in contracts or staff handbooks, provides more generous terms. This could mean an extra week’s pay per year, fixed bonuses, or better treatment for long-serving staff. Carefully review your paperwork, ask HR for copies of company policies, and check union or staff agreements.
If the policy promises more than the statutory minimum, it’s usually legally binding.
For help confirming your entitlement, see Redundancy or ACAS’s redundancy pay guide.
Using a redundancy pay calculator to check your entitlement
Redundancy pay calculators help you check for errors and ensure the correct statutory cap and multipliers are applied. Enter your age, length of service, and weekly pay into the calculator—it does the rest. Some calculators, including ours, allow the entry of enhanced terms for side-by-side comparison.
How to challenge or negotiate your redundancy payment
If your payment offer is lower than expected or omits entitlements, raise this with HR, citing your contract, company policy, or evidence. Discrepancies over years of service or pay cap often resolve with payslip evidence or copies of contracts. If negotiations are difficult, our solicitors can intervene on your behalf—often leading to significant uplifts.
If you suspect discrimination, unfair selection, or breach of company redundancy policy, seek legal advice immediately.
Learn more in Settlement Agreement Advice or Redundancy.
If you are being offered a redundancy settlement agreement, legal advice is required—your employer pays and our guidance is entirely free for you. Our solicitors will check your redundancy pay, address unfair offers, and negotiate on your behalf at no charge. Call 0800 054 1144 or book online now for a rapid, remote appointment.
Is redundancy pay tax free? Understanding tax, notice pay, and settlement agreement payments
Redundancy payments are treated differently for tax. Statutory redundancy pay and ex gratia compensation for loss of employment are tax free up to £30,000. Contractual payments like payment in lieu of notice (PILON), holiday pay and outstanding salary are taxable as normal income. Your settlement should show a breakdown listing each element’s tax status.
The Post-Employment Notice Pay (PENP) rules now mean all notice pay—whether contractual or not—is taxed fully. Label each payment type correctly to avoid HMRC issues.
See gov.uk termination payments and tax rules and our Settlement Agreement Calculator for details.
The £30,000 tax exemption: how it applies
Redundancy payments up to a combined £30,000 are tax-free, provided they are genuine compensation for loss of office (statutory redundancy, enhanced redundancy, and ex gratia settlement sums). Anything above £30,000 is taxed at your normal income tax rate. This exemption is per employment termination, not per payment.
See HMRC’s guidance for examples.
Payment in lieu of notice (PILON) and tax on notice periods
If you receive pay for your notice period but do not work it (PILON), it is always taxed as earnings. The PENP regime requires that any amount equivalent to your notice pay is subject to tax and National Insurance, regardless of how it’s described.
Check the agreement breaks out PILON separately from redundancy or settlement pay.
Read more about PILON on gov.uk.
What counts as taxable vs non-taxable redundancy payments
Only redundancy and genuine ex gratia compensation up to £30,000 is tax free. PILON, accrued holiday pay, wages and bonuses are always taxable at your normal rate.
| Payment Type | Tax Free? | Taxable? |
|---|---|---|
| Statutory redundancy | Yes (up to £30,000) | No |
| Ex gratia/settlement | Yes (up to £30,000) | Yes (above £30,000) |
| PILON | No | Yes |
| Holiday pay | No | Yes |
| Wages/bonus | No | Yes |
Detailed breakdown at gov.uk termination payments and tax.
How tax treatment differs for settlement agreement redundancy
The way payments are described in the settlement agreement does not affect their tax status—HMRC will tax each element according to the law. Settlement agreements often contain a tax indemnity requiring the employee to repay any future claim from HMRC if sums were misallocated, so getting this right is crucial.
For advice, visit our settlement agreement advice or check HMRC’s termination guidance.
If you’ve received a redundancy settlement agreement, employer-funded independent legal advice is required. Our solicitors will review both your pay and tax breakdown, prevent costly errors, and negotiate for a better package—all at no cost to you. Call 0800 054 1144 or book online now for a same-day expert review.
Key clauses and risks in redundancy settlement agreements (what to look out for)
Beyond the payment figure, pay close attention to settlement agreement clauses—especially those covering confidentiality, restrictive covenants, references, and tax indemnities. These clauses can affect future employment, what you can say about your exit and your ongoing tax risk.
Always clarify: what reference will your employer provide? Are post-employment restrictions fair and proportionate? What claims (e.g. discrimination, harassment, whistleblowing) are being waived?
More at Settlement Agreement Advice and the gov.uk guide to settlement agreements.
Confidentiality clauses and non-disclosure agreements
Most agreements require you to keep the terms and sometimes the fact of the settlement confidential. Restrictions often include what you can say about your departure to colleagues or future employers, and can last indefinitely.
For guidance, see ACAS on confidentiality and our Settlement Agreement Advice.
Restrictive covenants and post-employment restrictions
Settlement agreements may add or amend post-employment restrictions (such as non-compete or non-solicit clauses). Review these carefully—check duration, territory, and scope. If too broad, they can severely limit your career opportunities.
Further details at Performance, Capability & Disciplinary Exits or ACAS guidance.
Employer references and settlement terms
References are not automatic. Most agreements include a “standard reference” clause or annex a specific template. Negotiate reference wording and ensure it is included in your agreement.
For more, visit client stories or ACAS’s references advice.
Tax indemnities and liability for underpaid tax
A tax indemnity clause usually makes you liable for any further tax HMRC demands in future. These can be uncapped and open-ended unless negotiated otherwise, so it’s vital the payment breakdown is accurate.
Confused by indemnities? See our settlement agreement calculator or gov.uk’s tax and termination guidance.
Step-by-step process: how to sign and complete your redundancy settlement agreement
- Receive draft: Employer gives you the settlement agreement and payment calculation.
- Review and questions: Check the figures and terms; clarify with HR or your solicitor if needed.
- Book legal advice: Arrange an appointment with our solicitors—employer pays.
- Advice session: Our solicitor reviews terms, tax, and risks, and answers your questions.
- Negotiate/challenge: If needed, we negotiate improvements directly with your employer.
- Sign and certify: Once agreed, you sign; our solicitor provides the required ILA certificate.
- Employer countersigns and pays: Settlement is finalised and payment processed.
For a full overview, see book your settlement agreement advice online or ACAS settlement process.
Remote, same-day independent legal advice explained
You don’t need to travel—our system lets you upload your documents, receive advice, and complete your settlement all remotely, often in a single day. Our solicitor reviews your agreement in advance and conducts the meeting by video or phone, providing the required ILA certificate by email upon completion.
Read more about how remote appointments work or ACAS’s independent advice guidance.
Stages from offer to completion
- Offer received and reviewed.
- Legal advice appointment and queries raised.
- Negotiation or corrections.
- Agreement signed and certified.
- Employer finalises and pays.
More in Book ILA online or gov.uk’s settlements guide.
What to expect from your solicitor and the employer
Your employer provides the draft agreement, payment statement, and agrees to pay your legal fee for advice. Our solicitors check the whole agreement for fairness, compliance, and tax correctness and can negotiate any changes needed for your benefit.
See our process in Settlement Agreement Advice or ACAS employee advice.
Why Choose Settlement Agreement Lawyers?
Our SRA-regulated solicitors specialise in redundancy, unfair dismissal, and all aspects of employment law settlement agreements. We act exclusively for employees across England & Wales, offering fully remote, free appointments paid for by your employer. Our solicitors spot errors, secure enhanced packages, and negotiate better terms in thousands of remote agreements each year.
Read free for employees for how our fees are always covered and book now.
Free for employees: employer pays, fees capped
All legal advice for settlement agreements is free to you as the employee—employer pays our fixed fee. No deductions, hourly rates, or excess to pay. You keep all of your settlement.
See funding and free for employees or book your ILA online.
Same-day, fully remote appointments UK-wide
Our digital booking means you can upload documents, receive advice, and sign off agreements from home—often within hours. Evening and urgent slots are available for tight deadlines.
See how easy it is to book your settlement appointment online.
SRA regulated solicitors with specialist employment expertise
You get advice from employment law experts—every agreement undergoes a thorough legal check, risk review, and recommendations for improvement where available. Our solicitors are regulated by the SRA for your peace of mind.
For legal expertise, visit Settlement Agreement Advice and Unfair Dismissal.
Experts in negotiating improved redundancy pay and settlement terms
Our solicitors negotiate improved terms for hundreds of employees each month—securing uplifts, enhanced redundancy, better references, and fairer tax treaties, all within the employer contribution.
For examples, see client success stories.
Frequently Asked Questions About Working out Redundancy Pay
Who can get redundancy pay and how do I check if I am eligible?
You can get statutory redundancy pay if you are an employee with at least two years’ continuous service and your role is genuinely redundant. Check your eligibility using our redundancy calculator or the government’s redundancy pay guide.
How do I calculate statutory redundancy pay for my age and service?
Statutory redundancy pay is calculated by multiplying the number of full years worked by the correct age band multiplier and your weekly pay (subject to the cap). Use our redundancy calculator or the gov.uk calculator.
What’s the difference between statutory and enhanced redundancy pay?
Statutory redundancy pay is the minimum set by law, while enhanced pay is a more generous package specified in your contract or company policies. Always compare both to ensure you receive your maximum entitlement. For details, see the settlement agreement calculator.
Is redundancy pay always tax-free and which payments are taxable?
Redundancy pay and ex gratia compensation up to £30,000 is tax free. Notice pay, holiday pay, bonuses, and payments in lieu of notice are taxable at your normal rate. For more, check gov.uk’s tax and redundancy pay page.
Can I negotiate a higher redundancy package or settlement offer?
Yes—you can often negotiate for increased redundancy pay, better references or improved settlement terms, particularly where company policy or custom supports a higher payment. Get legal advice before signing; our settlement agreement advice can help.
What should I do if my redundancy pay is underpaid or refused?
Ask your employer to explain or correct any error in writing. If not resolved, seek legal advice immediately. Our solicitors can negotiate with your employer or help you take further action. Check your entitlement with our redundancy calculator.
Do I have to accept a settlement agreement from my employer?
No, you’re not compelled to accept a settlement agreement. If you don’t sign, your statutory redundancy rights and ability to claim remain. Only sign when confident the offer is fair and you have had legal advice at your employer’s expense. Book settlement agreement advice online for certainty.
How long does the redundancy settlement process usually take?
Many agreements are finalised within a few days, especially with same-day legal advice and prompt responses. Complex negotiations may take longer. Our solicitors can generally complete the process the same day you instruct us. Check appointment times at book ILA online.
Book Your Free Redundancy Pay Review and Settlement Agreement Consultation
Get the maximum redundancy pay and the best settlement terms with expert guidance. Our solicitors provide a free, rapid review, explain your rights, identify underpayments, and negotiate where necessary—always remotely and always funded by your employer. For specialist support, same-day advice, and peace of mind, call Settlement Agreement Lawyers on 0800 054 1144 or book your settlement agreement advice online.























