Employment & Pay19 October 2026

Redundancy in 2026: Your Rights, Statutory Pay and How to Negotiate a Better Package

Written and reviewed by, LLM (UK), CFP®·Published

Redundancy in 2026: Your Rights, Statutory Pay and How to Negotiate a Better Package

Being told your role is "at risk" is stressful, but it is also when knowing your rights is worth real money. Statutory redundancy pay is only the floor, and the gap between a statutory-only exit and a negotiated one can easily run to several thousand pounds, much of it tax free.

This guide takes the process in order: your rights at each step, how the package is taxed for 2026/27, and where the room for negotiation sits.

Try it yourself: the Redundancy Pay Calculator works out your statutory redundancy pay from your age, service and weekly pay, and estimates the tax on a full package including notice pay and holiday pay.

Step 1: being placed "at risk" and consultation

Redundancy means the employer needs fewer people to do a kind of work, or the work is ending where you are. Before dismissing anyone, the employer should consult.

If 20 or more redundancies are proposed at the same time, collective consultation has fixed minimum periods:

Proposed redundancies Consultation must start at least
20 to 99 30 days before dismissals take effect
100 or more 45 days before dismissals take effect

Below 20 there is no fixed timetable, but individual consultation is still expected. Use consultation to question the business case, suggest alternatives (reduced hours, a different role, a later date), and ask for the selection criteria and your scores in writing. If the employer starts consultation late or does not consult at all, you can bring an employment tribunal claim.

Step 2: selection

Where several people do similar work and only some will go, there is a "selection pool". The employer must use a fair and objective method. GOV.UK lists common ones as last in, first out, volunteers, disciplinary records, and appraisals, skills, qualifications and experience.

You cannot be selected because of sex, race, disability, age, pregnancy, whistleblowing or jury service, among other reasons; that would be unfair dismissal. If you think you were scored unfairly, write to your employer setting out why and ask to appeal. Vague or inconsistent scoring is a common weakness in a redundancy process, and it is leverage in any negotiation.

Step 3: suitable alternative employment

Your employer may offer another job within the organisation or an associated company. Whether it is "suitable" depends on pay, status, hours, location and how similar the work is.

You have the right to a 4-week trial period in any alternative job. It can be extended for retraining, but only if agreed in writing before the trial starts. If it does not work out, give notice within the trial to keep your statutory redundancy pay. But if you unreasonably turn down a suitable offer, you can lose that pay altogether, so put any reasons for declining in writing.

Step 4: notice, and time off to job hunt

Once you are dismissed, you are entitled to at least the statutory notice period, or your contractual notice if that is longer:

Continuous service Statutory minimum notice
1 month to 2 years 1 week
2 to 12 years 1 week per full year
12 years or more 12 weeks

Notice pay is based on your average weekly earnings over the 12 weeks before notice starts. Your employer can instead pay in lieu of notice (PILON), covering basic pay and contractual extras such as pension contributions.

If you have 2 years' continuous service by the end of your notice, you are entitled to reasonable time off during notice to look for work or arrange training. The employer only has to pay up to 40% of a week's pay for it across the whole notice period, though many pay more.

Statutory redundancy pay in 2026/27

You qualify for statutory redundancy pay after 2 years' continuous service. For redundancies on or after 6 April 2026, weekly pay is capped at £751 (Northern Ireland sets its own cap of £783), service counts for a maximum of 20 years, and the maximum payment is £22,530. You get half a week's pay for each full year under 22, one week's pay for each full year aged 22 to 40, and one and a half weeks' pay for each full year aged 41 or over.

You have 6 months from the date your job ends to claim statutory redundancy pay if your employer does not pay it.

Worked example: Priya's package

Priya is 45, has 10 full years' service and earns £40,000 (about £769 a week). Her redundancy takes effect at the end of October 2026, so she has already earned about £23,333 in the tax year.

  • Statutory redundancy pay: her last 10 years were at ages 44 down to 35. Four years at 41 or over give 6 weeks; six years at 35 to 40 give 6 weeks. That is 12 weeks at the capped £751, so £9,012. Her salary is above the cap, so she loses about £18 a week of value on every week counted.
  • Notice: her contract matches the statutory minimum, 10 weeks, which her employer pays in lieu: £7,692.31.
  • Untaken holiday: 5 days, £769.23.
Statutory-only offer Negotiated offer
Statutory redundancy pay £9,012.00 £9,012.00
Ex gratia enhancement £0 £6,000.00
Notice pay (PILON) £7,692.31 £7,692.31
Holiday pay £769.23 £769.23
Gross £17,473.54 £23,473.54
Income tax £1,692.31 £1,692.31
Employee NI £676.92 £676.92
Net £15,104.31 £21,104.31

The notice and holiday pay are earnings, taxed at 20% with 8% NI. The redundancy pay and the £6,000 enhancement are a termination payment, and because together they come to £15,012, under the £30,000 limit, every penny of the extra £6,000 reaches her bank account. Figures are on an annual basis, as the calculator models them; payroll may deduct differently in the month of payment.

How the package is taxed

The rules are set out on GOV.UK's termination payments page:

  • The first £30,000 of statutory redundancy pay and genuine non-contractual compensation combined is free of income tax and NI.
  • Anything above £30,000 is taxed as income, but you pay no employee NI on it; the employer pays Class 1A on the excess.
  • Notice pay (PILON or post-employment notice pay), holiday pay, unpaid wages and bonuses you had already earned are taxed as normal earnings, with income tax and NI.

The Autumn Budget on 28 October 2026 could change tax figures for future years.

Negotiating a better package

Most enhanced packages are agreed through a settlement agreement, in which you give up the right to bring tribunal claims in return for money. For the waiver to be valid you must take independent legal advice on the agreement, and employers commonly contribute towards the fee. Where the agreement says the employer pays the fee directly to your lawyer, that contribution is not taxable on you (section 413A of the Income Tax (Earnings and Pensions) Act 2003), with no statutory cap.

Where the leverage comes from:

  1. Process flaws. Late or thin consultation, unclear selection scores, or no real look at alternative roles all raise the risk of a tribunal claim for the employer.
  2. Your contract. Check for contractual enhanced redundancy terms, bonus entitlements, share schemes and notice longer than the statutory minimum. Contractual sums are owed regardless and should not be "traded" as if they were concessions.
  3. The ask. Ask for specific, costed items: an ex gratia sum, being paid for notice rather than working it, an agreed reference, outplacement support, and a fee for legal advice.
  4. Timing. The leaving date decides which tax year the money falls in and whether you complete another year of service, which can add weeks of statutory pay.

Using your pension

Employer contributions to a registered pension paid as part of a termination payment are not taxed (subject to your annual allowance). That matters most when a package goes over £30,000. If Priya had negotiated a £25,000 enhancement, her termination payment would be £34,012, leaving £4,012 taxable and costing her £802.40 in income tax. Asking for that £4,012 to go into her workplace pension instead removes the tax now, though pension income is taxable when drawn.

From 55 (57 from 6 April 2028) you can usually draw on defined contribution pensions, but taking taxable income flexibly cuts your future money purchase annual allowance to £10,000. Take advice before using a pension to bridge to a new job.

After you leave: benefits

  • New Style Jobseeker's Allowance is based on your Class 1 National Insurance record, usually over the last 2 tax years, and can be paid for up to 182 days. Your savings do not affect it. The maximum rate is £95.55 a week at 25 or over.
  • Universal Credit is means tested. Redundancy pay you still hold is treated as capital: over £16,000 of savings rules you out, and between £6,000 and £16,000 reduces your award by £4.35 a month for every £250.

Claim New Style JSA promptly even if your payment rules out Universal Credit.

Frequently asked questions

How much is statutory redundancy pay in 2026? Up to £751 a week (£783 in Northern Ireland) multiplied by weeks earned according to age and service, to a maximum of £22,530.

Is redundancy pay taxed? Not up to £30,000 combined with other genuine compensation. Notice pay and holiday pay are taxed as earnings.

Do I have to sign a settlement agreement? No. It is voluntary. If you do not sign, you still receive your statutory and contractual entitlements, and keep the right to bring a claim.

The bottom line

Statutory redundancy pay is a minimum, capped at £751 a week. Read the process critically, put your concerns in writing, and treat the settlement agreement as a negotiation: the first £30,000 of genuine compensation is tax free, so an extra £6,000 agreed in a meeting can be worth the full £6,000 to you.

Start with your statutory figure in the Redundancy Pay Calculator, then check what your final pay looks like in the Salary Calculator.

Related calculators and guides

This article is for general guidance only and is not personalised legal, tax or financial advice. Employment and tax rules are complex and your circumstances may differ. For advice on a redundancy or settlement agreement, speak to an employment solicitor, a trade union or Acas. Figures are for the 2026/27 tax year and sourced from gov.uk.

Sources

Rates and rules in this article are taken from the official pages below. Figures were checked against these sources at the last review date shown above; always confirm against the source before acting.

About the author

, LLM (UK), CFP®, CIM®, PFP®. Financial planner with 18 years in banking and wealth management, holding a UK master of laws and the Canadian CFP®, CIM® and PFP® designations. Writes and reviews every calculator and article on FinanceToolz.

Rates and thresholds in this article are taken from HMRC and GOV.UK. See our editorial policy for how content is sourced, reviewed and corrected. This is general information, not regulated financial advice.

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