EMCC European Monitoring Centre on Change

United Kingdom: Severance pay/redundancy compensation

United Kingdom
Phase: Management
Severance pay/redundancy compensation
Last modified: 23 September, 2017
Native name:

Employment Rights Act 1996

English name:

Employment Rights Act 1996


Part IX


Redundancy situations arise where:

  • the business as a whole is closing down;
  • the particular part of the business in which the employee worked is closing down;
  • the business is closing down in a particular location;
  • or the business needs fewer employees to carry out the work that the particular employee is employed to do. 

Fixed-term employees are treated as redundant if the contract of employment is not renewed and not re-engaged due to the same reasons as set out. Ceasing can be permanent or temporary and for whatever reason. The only categories of employees excluded from the right to redundancy payment are domestic servants, public officers, and overseas government employees.

Section 135 of the Employment Rights Act (1996) provides employees with a general right to statutory legal minimum pay in the case of redundancy. To be entitled to statutory redundancy pay an employee must have worked continuously for at least two years and have been dismissed, laid off or put on short-time working. The two year time period includes time off for maternity or parental leave. Employees who opt for early retirement or who refuse suitable alternative employment are not entitled to statutory redundancy pay. Employers must make payment to the employee at the time of dismissal or shortly after.

The employee's age and service determine the amount of severance pay/redundancy entitlement that an employee is entitled to.

  • Employees who are between 18 and 21 years of age are entitled to half a week's pay for each full year of service.
  • Employees who are between 22 and 40 years of age are entitled to one week's pay for each full year of service.
  • Employees who are 41 years of age or older are entitled to one and a half week's pay for each full year of service. 

The maximum service that can be taken into account is 20 years. Weekly pay for the purposes of redundancy pay is capped at €565 (£489 from 6 April 2017) with total maximum statutory compensation for redundancy limited to €16,942 (£14,670 from 6 April 2017). The maximum statutory award and total compensation limits are annually up-rated in line with the consumer prices index and details of the current rate can be found on the government's website.


Collective agreements may contain more generous redundancy payments and/or reduce the qualifying period to less than two years of continuous service.

Cost covered by
  • Employer
Involved actors other than national government
National goverment only
No, applicable in all circumstances
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