23 September 2020

Worried about redundancy?

Five steps to take

5 min read


Latest update

Please note that this article was last updated on 23 September 2020. Any information quoted was accurate at this date.

The prospect of losing your job can be scary and stressful for many reasons. But the main concern for most people is probably what it will mean for their money.

The good news is that there are things you can do to take control  Our guide is here to help you understand what redundancy pay you'll get and what you can do to manage your new financial situation.

  1. Check if you're entitled to redundancy pay
  2. Check if you have insurance
  3. Do a budget
  4. Check what benefits you can claim
  5. Understand what will happen to your workplace pension


Step 1: Check if you’re entitled to redundancy pay

As a minimum, all employees who have been working for their employer for at least two years are entitled to statutory redundancy pay.

But some employers offer more generous redundancy packages.  Check your employment contract to see if this applies to you.

How much is statutory redundancy pay?

The amount you get depends on your age, your pay and how long you’ve been working for your employer.  You can find out how much you’ll get using the government’s redundancy pay calculator.

You get:

  • half a week’s pay for each full year you were under 22
  • one week’s pay for each full year you were 22 or older, but under 41
  • one and half week’s pay for each full year you were aged 41 or older

Your weekly pay is capped at £538 (£560 in Northern Ireland) and your length of service is capped at 20 years which means the maximum statutory redundancy pay you can currently get is £16,140 (£16,800 in Northern Ireland).  

If you’re made redundant after 31 July 2020 (14 August 2020 in Northern Ireland), your statutory redundancy pay must be based on your full salary, not the amount you are being paid if you are on furlough.  

You can receive up to £30,000 in redundancy pay free of tax and National Insurance.

What about notice?

Your employer must give you a minimum amount of notice too.  This is called statutory redundancy notice.

You get one week’s notice if you’ve been employed between one month and two years.  If you’ve worked for your employer for two years or more, you get a week’s notice for each year up to a maximum of 12 weeks.  

Again, your employer can give you more than this so check your contract to see what it says.

Your employer must pay you during your notice period regardless of whether you work it or not. And, for anyone made redundant after 31 July 2020 (14 August 2020 in Northern Ireland) your statutory notice pay must be based on your full salary not your furloughed salary. If your employer offers a longer notice period, they can base that on a lower rate of pay as long as the notice period is at least one week longer than the statutory minimum. 

Your notice pay is taxed as pay in the normal way.

What about holiday pay?

You should also be paid for any outstanding annual leave you have and this should be paid at your full rate (not your furlough rate). You still build up holiday entitlement during furlough leave.

Any holiday pay you get is taxed in the usual way.

What if my employer has gone bust?

If your employer is unable to pay your redundancy pay because they have become insolvent, you can claim the money you are owed from the government using the links below.

Make a claim for redundancy pay, holiday pay and any unpaid wages or commission

Make a claim for loss of notice pay

If you live in Northern Ireland, the situation is different. Find out about your rights in Northern Ireland if your employer is insolvent.


Step 2: Check if you have insurance

It’s worth having a dig through your paperwork to see if you have any insurance that might pay out for redundancy. For example, you may have taken out Mortgage Payment Protection Insurance (MPPI) when you got your mortgage or Payment Protection Insurance (PPI) when you took out a loan or credit card. Contact the insurer to find out how to make a claim.

Step 3: Do a budget

It’s a good idea to draw up a budget so you’ve got a clear idea of what your monthly expenses are. It’ll help you see how long any redundancy money you have is likely to last and it might help you identify areas you can cut back on too.

Try the Money Advice Service’s budget planner.

Step 4: Check what benefits you can claim

Once you’re out of work there may be benefits you can get.  The charity Turn2us has a useful online benefits calculator you can use to see what you might be entitled to.

Step 5: Understand what will happen to your workplace pension

When you stop working your employer will stop contributing to your pension.

If you have a Royal London workplace pension, you can choose to keep it running and either stop contributing to it or continue to do so.

You can use your redundancy money to pay additional pension contributions. However, there are limits on how much you can contribute into a pension in a tax year and still receive tax relief. The maximum you can contribute and get tax relief is 100% of your earnings (up to a maximum of £40,000) or £3,600, whichever is the higher.

For options available with other types of workplace pensions, see this guide from the Money Advice Service.

If you would like further help on this, you can get free and independent guidance on pensions from The Pensions Advisory Service. Alternatively you could seek financial advice.

Further help

Money Advice Service redundancy tool

A tool that gives a personalised summary of your legal rights, details of how much statutory redundancy pay you’ll get and advice on how to manage your money.

Acas (England, Wales and Scotland)

Acas provides employees with free, impartial advice on their workplace rights.

Helpline: 0300 123 1100 [Mon-Fri 8am to 6pm]

Labour Relations Agency (Northern Ireland)

The Labour Relations Agency provides information on workplace rights in Northern Ireland.

Helpline: 03300 555 300