What is redundancy pay?
Redundancy pay is money some employees receive when their job ends because the role is no longer needed. This can happen when a business changes direction, restructures or needs to reduce costs — and it’s about the position being removed, not the person’s performance.
Whether redundancy pay applies, how much it is and how it’s taxed depends on local law and the employment contract.
In the UK, eligible employees may be entitled to statutory redundancy pay, and some employers offer enhanced packages. Redundancy pay is usually separate from other final payments, such as notice pay and any unused holiday pay.
Things to know
- Redundancy pay rules vary by country and may depend on length of service
- Some employers offer enhanced redundancy pay above the statutory minimum
- Redundancy pay is usually separate from notice pay and holiday pay
- Tax treatment can vary, so it’s important to check the latest guidance
- Redundancies should be handled fairly and with clear communication
FAQs
Who qualifies for redundancy pay?
Eligibility depends on local law and the employment contract. In some places, a minimum length of service is required.
How is redundancy pay calculated?
It depends on local rules and company policy. In the UK, statutory redundancy pay is based on factors such as age, pay and length of service.
Is redundancy pay the same as notice pay?
No. Notice pay covers the notice period. Redundancy pay is compensation linked to redundancy.
Is redundancy pay taxed?
Tax rules vary by country. It’s best to check current government guidance or speak with payroll or HR.
