What you are entitled to without signing
- Statutory redundancy pay if you have two years' continuous service: half a week's pay for each full year under 22, one week for each year aged 22 to 40, and one and a half weeks for each year aged 41 or over, for up to 20 years. A week's pay is capped at £751 from 6 April 2026.
- Notice, worked or paid. See notice pay.
- Accrued holiday pay.
- Consultation, and consideration for suitable alternative roles.
- Reasonable paid time off to look for work during notice, if you have two years' service.
Use the calculator to find your statutory figure.
Why employers add a settlement agreement
A redundancy dismissal is only fair if there is a genuine redundancy situation, a fair selection method, proper consultation and a search for alternative work. Any of those can be challenged. An employer paying an enhanced package wants certainty in return, and a settlement agreement is the only way to get a binding waiver.
So the question for you is whether the enhancement is a fair price for the claims you are waiving.
Signs the redundancy could be challenged
- Your role continues under a new title or is given to someone else.
- You were the only person at risk and there was no explanation of why.
- Selection criteria were vague, subjective or scored without evidence.
- Consultation was a single meeting where the decision had clearly been made.
- Vacancies existed that you were not told about.
- The timing follows a grievance, a pregnancy or maternity leave, sickness absence or a protected disclosure.
- Twenty or more redundancies were proposed at one establishment within 90 days and there was no collective consultation.
If several apply, you may have an unfair dismissal or discrimination claim, and the compensation element should reflect it.
Enhanced redundancy terms
Check your contract, the staff handbook and what was paid in previous rounds. If the employer has a contractual enhanced scheme, or has paid the same enhancement so consistently that it has become an entitlement, then that enhancement is something you are owed anyway and not compensation for signing.
How a redundancy package is taxed
Statutory redundancy pay, enhanced redundancy pay and any compensation are added together, and the first £30,000 is tax-free. Notice pay and holiday pay are taxed as earnings. See tax and the £30,000 rule.
If you are on maternity or family leave
Employees who are pregnant, on maternity, adoption or shared parental leave, or recently returned from it, have priority for any suitable alternative vacancy. If that was not honoured, the dismissal is likely to be automatically unfair and discriminatory.
Voluntary redundancy
Volunteering does not reduce your statutory entitlement, and it still counts as a dismissal for redundancy pay and tax purposes. Voluntary terms are usually documented in a settlement agreement, and they are negotiable in the same way.
Frequently asked questions
Do I have to sign a settlement agreement to get redundancy pay?
No. Statutory redundancy pay and notice are legal entitlements. An employer can make an enhanced payment conditional on signing, but not the statutory minimum.
Is redundancy pay tax-free?
Statutory and enhanced redundancy pay count towards the £30,000 exemption. Notice pay and holiday pay paid at the same time are taxed.
What if I think the redundancy is not genuine?
A redundancy used to remove a particular person, or a process with unfair selection or no real consultation, can amount to unfair dismissal. That increases what a settlement should be worth.
Can I be offered a settlement agreement during consultation?
Yes. Employers sometimes offer voluntary exits on settlement terms to avoid or shorten a compulsory process. You are free to decline and stay in the process.
Sources
About this guide. This page is general information, not legal advice, and reflects the law and published government plans on the date shown above. Frederick George is a legal referral service, not a law firm. For advice on your own circumstances we will introduce you to an SRA-regulated solicitor.