Making staff redundant

Last updated: 8 December 2017

Redundancy pay

If you make employees redundant, they might be entitled to redundancy pay - this is called a 'statutory redundancy payment'.

To be eligible, an individual must:

  • be an employee working under a contract of employment
  • have at least 2 years' continuous service
  • have been dismissed, laid off or put on short-time working - those who opted for early retirement don't qualify

You must make the payment when you dismiss the employee, or soon after.

A redundant employee also has the right to a written statement setting out the amount of any redundancy payment and how you worked it out.

Statutory redundancy pay rates

These are based on an employee's age and length of employment and are counted back from the date of dismissal.

You can use the redundancy pay calculator to work out payments.

If you don't pay

If you fail to pay redundancy pay or if an employee disagrees with the amount, they have 6 months from the date their employment ended to make a claim for payment to an employment tribunal.

If they don't make the claim in time, a tribunal still has the power for a further 6 months to decide whether or not they should get a payment.

If you have financial difficulties

If your business would become insolvent as a result of making the statutory redundancy payments, the Insolvency Service's Redundancy Payments Office may be able to help.

You'd have to repay any debt as soon as possible - contact the Redundancy Payments Helpline for more information:

Redundancy Payments Helpline
0845 145 0004


Redundancy pay isn't taxable if it's less than £30,000. If you decide to make extra payments over the £30,000 threshold, they're subject to tax and National Insurance.

Other termination payments, like payment in lieu of a holiday or notice, must have tax and National Insurance deducted.

Making staff redundant
Redundancy pay