Redundancy Letter Explained: What It Really Means (UK 2026)

Rates changed in April 2026: From 6 April 2026, the weekly pay cap used to calculate statutory redundancy pay rose to £751, making the maximum statutory payment £22,530. If your letter uses the old £719 figure, the sums may be wrong.At a glance

• You normally need two years' continuous service to qualify for statutory redundancy pay. Under two years, you may still be owed notice pay and untaken holiday.
• Statutory redundancy pay is capped at £751 per week and 20 years' service — a maximum of £22,530 from 6 April 2026.
• Redundancy pay up to £30,000 is tax-free. Notice pay and holiday pay are always taxable, whatever the letter implies.
• A genuine redundancy means the job disappears, not the person. If someone is hired to do your role afterwards, it may not be a real redundancy.
• Appeal deadlines are usually five working days, and tribunal claims almost always have a three-month-less-one-day limit. These are the numbers to find first.
• Not legal advice: This article explains the rules in plain English. For your specific situation, speak to an employment solicitor, ACAS, or Citizens Advice.

A redundancy letter is one of the few documents that arrives when you are least able to read it carefully. You are worried about money, your mind is racing, and the letter itself is written in careful HR language designed to be legally watertight rather than clear.

But that letter is doing real work. It sets your termination date, triggers your notice period, states what you will be paid, and — crucially — starts several clocks running. Miss those deadlines and you lose options you cannot get back.

This guide walks through what each part of a UK redundancy letter actually means, how the payment is calculated, and what to check before you sign anything.

What a redundancy letter must tell you

There is no single official template, so letters vary. But a proper redundancy letter should contain all of the following. If yours is missing something, that is worth asking about in writing.

• Confirmation that your role is redundant — and ideally why (site closure, reduced need for the work, restructure).
• Your termination date — the last day of your employment.
• Your notice period — and whether you will work it, be placed on garden leave, or be paid in lieu.
• A breakdown of your final payment — redundancy pay, notice pay, outstanding holiday, and anything else.
• Your right of appeal — who to write to and by when.
• Continuous service dates — the figures used to work out your payment.

The three dates that matter most

Before anything else, find these and write them down:

1. Termination date. Everything else counts from here — including the tribunal deadline.
2. Appeal deadline. Often five working days from the date of the letter, not from when you read it.
3. The date you must respond by if a settlement agreement is attached.

Decoding the language

Some phrases carry far more weight than others.

"At risk of redundancy"

This is not dismissal. It means consultation has started and your role is under review. You should be consulted individually, told the selection criteria, and given the chance to respond or suggest alternatives. If your first letter jumps straight to dismissal without any consultation, that is a serious problem with the process.

"Payment in lieu of notice" (PILON)

Your employer ends your job immediately and pays your notice period instead. This is taxable and subject to National Insurance in full — it is not part of the £30,000 tax-free redundancy allowance, even when it appears on the same line of the letter.

"Garden leave"

You remain employed and paid, but stay away from work. You are still bound by your contract during this time, including confidentiality and any restrictions on working elsewhere.

"Suitable alternative employment"

Your employer must offer you any suitable vacancy that exists. If you unreasonably refuse a genuinely suitable role, you can lose your right to redundancy pay. "Suitable" considers pay, status, location, hours, and skills — so a role two hours away on lower pay is unlikely to qualify. You also have a statutory four-week trial period in a new role without giving up your redundancy rights.

"Settlement agreement" or "compromise agreement"

A legally binding contract where you accept a payment and give up your right to bring claims. You must take independent legal advice for it to be valid, and the employer normally pays a contribution towards that advice. Never sign one on the day you receive it.

Not sure what your letter is actually saying? Upload your redundancy letter or settlement agreement to Clarify and ask questions in plain English — "how much am I actually getting after tax?", "what's my appeal deadline?", "does this clause stop me working for a competitor?". Every answer points back to the exact line in your document, so you can check it yourself.

Try Clarify free → getclarify.co.uk

How your redundancy pay is calculated

Statutory redundancy pay depends on three things: your age, your length of continuous service, and your weekly pay.

For each full year of continuous service you receive:

• Half a week's pay for each year you were under 22
• One week's pay for each year you were 22 to 40
• One and a half weeks' pay for each year you were 41 or over

Three caps then apply. Only the last 20 years of service count. Weekly pay is capped at £751 for dismissals on or after 6 April 2026. So the statutory maximum is £22,530.

A worked example

Priya is 45, has worked for her employer for 12 years, and earns £900 a week.

• Years worked aged 41+: 5 years × 1.5 weeks = 7.5 weeks
• Years worked aged 22–40: 7 years × 1 week = 7 weeks
• Total: 14.5 weeks
• Her £900 weekly pay is capped at £751
• 14.5 × £751 = £10,889.50

Note how much the cap costs her — around £2,160 less than her actual weekly pay would give. That is normal and lawful. What is not normal is your employer using the wrong cap, the wrong start date, or forgetting a higher contractual redundancy scheme.

Notice pay is separate

Statutory minimum notice is one week for each full year of service, up to a maximum of 12 weeks — but your contract may give you more, and the contract wins if it is more generous. Notice pay is on top of redundancy pay, not part of it.

What to check before you sign anything

• Your start date. Employers sometimes use the date on a later contract rather than when you actually started. Check against your first payslip or offer letter.
• Your weekly pay figure. If your hours vary, it should be an average of the 12 weeks before you were given notice.
• Your contract's redundancy clause. Enhanced schemes are common and are often far more generous than statutory.
• Holiday. You are owed pay for untaken statutory holiday accrued up to your termination date.
• The tax split. The first £30,000 of genuine redundancy pay is tax-free; notice, holiday, and bonuses are taxed as normal earnings.
• Restrictive covenants. A settlement agreement may quietly extend or restate limits on where you can work next.

What to do in the first week

1. Reply in writing. Acknowledge the letter and ask for the calculation breakdown if it is not included. Keep everything on email.
2. Appeal if the process looks wrong. No consultation, unclear selection criteria, or a vacancy you were never offered are all grounds. Appealing costs nothing and preserves your position.
3. Check your finances. You may be able to claim New Style Jobseeker's Allowance or Universal Credit, and check whether any payment protection insurance on loans or your mortgage applies.
4. Note the tribunal deadline. Most employment tribunal claims must start ACAS early conciliation within three months less one day of your termination date. This deadline is strict.
5. Get advice before signing a settlement agreement. It is a legal requirement, and the employer usually pays for it.

Check the maths before you accept. Clarify reads your letter, contract, and payslips together and answers questions like "is this the enhanced scheme in my contract?" and "which parts of this payment get taxed?" — with citations back to the exact wording, so you know where every number came from.

Check your redundancy letter now → getclarify.co.uk

Frequently asked questions

Do I get redundancy pay if I have worked there less than two years?

Not statutory redundancy pay — that requires two years' continuous service. But you are still entitled to your contractual or statutory notice period and payment for any untaken holiday. Some employers also pay an enhanced amount regardless of service.

Is my redundancy payment taxed?

The first £30,000 of a genuine redundancy payment is free of income tax and National Insurance. Anything above £30,000 is taxed. Notice pay, holiday pay, and bonuses are taxed as normal earnings, no matter how the letter groups them.

Can I be made redundant while on maternity or sick leave?

Yes, redundancy can happen during any type of leave, but you cannot be selected because of that leave — that would be discrimination. Employees on maternity, adoption, or shared parental leave also have enhanced priority for suitable alternative vacancies.

What if my employer just replaces me afterwards?

A redundancy is only genuine if the need for the work has reduced or disappeared. If your employer hires someone to do essentially the same job soon afterwards, that suggests the dismissal was not truly a redundancy, and may be unfair dismissal. Gather evidence such as job adverts.

How long do I have to challenge it?

Internal appeal deadlines are usually about five working days from the letter. For an employment tribunal, you generally have three months less one day from your termination date, and you must notify ACAS for early conciliation before you can bring a claim.

Can I refuse a job they offer me instead?

You can, but if the role was a suitable alternative and your refusal was unreasonable, you may lose your redundancy pay. You are entitled to a four-week trial period in a new role, during which you can still decide it is unsuitable without losing your rights.

What is the difference between voluntary and compulsory redundancy?

Voluntary means you apply to leave, usually for an enhanced package; compulsory means you are selected. The tax treatment is the same, but voluntary redundancy makes it much harder to bring an unfair dismissal claim later, so read the terms carefully first.

Do I have to sign the settlement agreement?

No. You can decline and keep your statutory entitlements and your right to bring a claim. A settlement agreement is a trade: extra money in exchange for giving up claims. Independent legal advice is legally required for it to bind you, and the employer normally contributes to that cost.

Related articles

• UK Payslip Explained: What Every Line Means (2026)
• Understanding Your DWP Benefits Letter (UK 2026 Guide)
• Decoding HMRC Letters: Every Reference Code and What to Do Next
• What Your Pension Statement Actually Means (UK 2026)

This article is general information about how UK redundancy rules work, and is not legal or financial advice. Employment law is fact-sensitive and your contract may give you more than the statutory minimum. For advice on your own situation, speak to an employment solicitor, contact ACAS, or visit Citizens Advice.