Where a UK employee is dismissed because their role is redundant, and they have at least two years' continuous service, they are entitled to a statutory redundancy payment. It is a floor, not a ceiling; many employers pay more under contractual or discretionary schemes.
How it is calculated
The calculation multiplies a number of weeks' pay by years of service, with the multiplier rising by age band, so older employees with long service receive proportionally more. Both the weekly pay figure and the maximum number of years counted are capped, and the caps are revised annually. This means the statutory maximum is far lower than many employees expect.
Redundancy has a legal meaning
A role is redundant when the business closes, the workplace closes, or the need for employees to do work of a particular kind has diminished. Labelling a dismissal as redundancy when the role continues to exist, or when the real reason is performance, is a common and costly error; the dismissal can be found unfair regardless of the payment made.
- A fair process, including consultation and consideration of alternatives, is required alongside the payment
- Collective consultation obligations arise above certain numbers of proposed dismissals
- Statutory redundancy pay is generally free of income tax
Why it matters when hiring internationally
Redundancy in the UK is a process as much as a payment, and paying the statutory sum does not by itself make a dismissal fair. Companies budgeting only for the payment often discover the process requirements late.