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What is statutory redundancy pay?

Statutory redundancy pay is a payment that eligible employees are entitled to receive when an employer makes an employee redundant. It is a minimum payment that is required by law and is intended to provide some financial support to employees who are losing their job due to redundancy.

Making redundancies isn’t an easy decision for any employer, but sometimes it’s just got to be done. But when times get tough, Citation can help make those decisions a little easier. We’re here to support your business in handling the sensitive subject of redundancies and make sure you have everything in place to get the difficult bits right.

Who is eligible for statutory redundancy pay?

So, who’s eligible for statutory redundancy pay? There are three key criteria in the UK that employees need to meet to qualify for redundancy pay.

Statutory redundancy pay requirements

1. Contract of employment

Employees must be working under a contract of employment. This can be a written or verbal contract.

Need a bit of help with your contracts? No worries. Our HR consultants create bespoke employment contracts to protect your business as part of our all-in-one HR & Employment Law package, which you can then store and distribute in your online hub, Atlas.

2. Continuous service

To be eligible for redundancy pay, employees must have continuously worked for your business for at least two years.

There are several breaks in service that don’t affect an employee’s redundancy pay entitlement, including breaks:

• Of less than one week (Sunday to Saturday);
• Of less than six months when re-engaged following a period when the employee was incapable of work due to sickness or injury;
• Because of a temporary cessation of work; and
• By arrangement or custom.

3. By reason of redundancy

An employee must have been dismissed by reason of redundancy, or have requested redundancy and you haven’t challenged their right to redundancy, after being laid off or put on short-time working for either four consecutive weeks or six non-consecutive weeks in a 13-week period. There’s a statutory definition of what ‘redundancy’ means, but it includes where you need fewer employees to do a particular type of work.

Who won’t get statutory redundancy pay?

While many employees in the UK are eligible to receive statutory redundancy pay if they’re made redundant, there are some exceptions to this. Any employees who fall into one or more of the following categories aren’t entitled to receive statutory redundancy pay.

• Employees without two years of continuous service – an employee must have completed two years of continuous service within your business, otherwise, they aren’t eligible for statutory redundancy pay. 
• Self-employed contractors or workers – i.e. people who aren’t employees.
• Employees who refuse suitable alternative employment – you might’ve offered your employee alternative employment arrangements within your business or an associated company. If your employee unreasonably refuses the offer, they may not be eligible for statutory redundancy. 

That being said, it is quite difficult to prove that the alternative work was so ‘suitable’ that it’s unreasonable for the employee to refuse it.  For example, they could argue that the new job location isn’t practical, or the new working pattern doesn’t suit their domestic circumstances, and then they could refuse the alternative job and still be due their redundancy pay.

How much statutory redundancy pay can employees get?

The amount of statutory redundancy pay an employee is entitled to depends on age, length of service and pay.

The employee is entitled to:

• one and a half week’s pay for each complete year of service after reaching the age of 41
• one week’s pay for each complete year of service between the ages of 22 and 40 inclusive, and;
• half a week’s pay for each complete year of service below the age of 22

The maximum length of service that may be taken into account when calculating redundancy pay is 20 years.

Employees who are made redundant on or after 6 April 2024 are entitled to a maximum statutory redundancy payment of £21,000 – this is based on 30 weeks’ pay and a weekly cap of £700.00 i.e. (£700 x 1.5) x 20.

Find out more about giving employees redundancy pay with our blog post here.

Check out our free redundancy process guide

Need more help with redundancy and how to get it right? Have a look at our free redundancy checklist, put together by our HR & Employment Law experts, which outlines five key areas for employers to think about. 

How to get redundancy right

When it comes to redundancies, pay isn’t the only area you need to get right. From working out your options and consultations to notice periods and difficult conversations, there’s a lot to juggle.

We’ve got loads of online resources and a great team of HR experts that are here to make sure you’ve got all the tools you need to protect your business. Check out our redundancy pay advice for more details on how Citation can help.

If you need a hand getting redundancy right the first time (and every time), then get in touch with our HR consultants and Employment Law experts at 0345 844 1111 or hello@citation.co.uk.