Severance pay: is it different from redundancy pay?

Your job is going. The employer calls the payment “severance” and wants a signature. Before you decide whether the offer is generous, find out how much of it they already owe you.

Check your offer before you sign

1. Get the reason for leaving in writing. Is your job redundant, is a fixed-term contract ending, or are you being asked to agree a mutual exit? A resignation does not normally bring redundancy pay.
2. Check your status and service. Keep your contract, start date, payslips and redundancy notice. Statutory redundancy pay normally needs employee status and at least 2 years’ continuous service. A “zero-hours” label does not settle your status.
3. Separate money owed from the extra. Ask: “Please itemise statutory redundancy pay, any contractual enhancement, notice pay, outstanding wages, holiday pay and the additional settlement payment, showing deductions and payment dates.” Compare the redundancy figure with the GOV.UK calculator.
4. Get advice before accepting a waiver. Send the offer to your union or an independent employment adviser. A settlement agreement needs qualifying independent advice to waive statutory claims. General advice from Acas is not a substitute.
5. Keep the deadline separate from the negotiation. Claim unpaid redundancy pay in writing promptly and keep proof of delivery. Contact Acas in Great Britain, or the Labour Relations Agency in Northern Ireland, if payment is disputed. Do not wait for HR to finish negotiating.

What severance means in UK law

There is no general UK law requiring a separate payment called severance whenever a job ends. The word describes a package. What matters is the legal basis of each part.

A care assistant on nights and a warehouse picker both need that breakdown. Notice pay does not replace redundancy pay. Holiday pay is money for leave you earned, not the employer’s generosity. We would judge the offer by the additional money and the rights you would give up, not the size of the headline cheque.

How much statutory redundancy pay are you owed?

You normally qualify if you are an employee, have at least 2 years’ continuous service and are dismissed because of redundancy. This usually means the business closes or needs fewer employees to do your kind of work. The right in England, Wales and Scotland comes from Part XI of the Employment Rights Act 1996. Northern Ireland has separate legislation.

Some groups have different arrangements or exclusions, including Crown servants, armed forces and police personnel, share fishermen and certain apprentices at the end of training. Check the GOV.UK exceptions if these apply.

Count full years of service, using your age in each year. Only the most recent 20 years count.

GOV.UK describes weekly pay as your average earnings over the 12 weeks before you received redundancy notice. For redundancies on or after 6 April 2026, the weekly cap in Great Britain is £751 and the maximum payment is £22,530. Northern Ireland’s weekly cap is £783 and its maximum is £23,490 from the same date. Use the calculator rather than multiplying all your service by your current age band.

Notice, holiday pay and contractual extras

Start with what you would receive without signing a settlement. Check your contract, any redundancy policy and collective agreement. A handbook provision or established practice can create a contractual right, but not every policy is binding.

Under the statutory notice rules, employees normally get at least 1 week’s notice after 1 month’s service and before 2 years. From 2 years, it is 1 week for each full year, up to 12 weeks. Your contract can give more. The employer may require you to work notice or pay in lieu. A lawful summary dismissal for gross misconduct is different.

Check unpaid wages, accrued but untaken statutory holiday, and bonus or commission due under your contract. For a chef or cleaner, those outstanding hours still matter even if there is no redundancy entitlement. Our final pay guide covers the separate payments.

An enhanced redundancy scheme may promise more weeks per year or remove the statutory weekly cap. Ask whether its figure includes statutory redundancy or is additional to it. Do not count the same payment twice. A non-compete clause is a restriction on your next job, not a benefit to you.

Is severance or redundancy pay taxable?

The £30,000 rule applies to qualifying termination payments, not the whole exit package. Statutory redundancy and qualifying enhanced redundancy or compensation share one combined £30,000 income-tax exemption. Non-cash benefits can count towards it too. There is no separate allowance for each item.

Wages, holiday pay, bonuses and notice pay are normally subject to income tax and employee National Insurance as earnings. Since 6 April 2018, the post-employment notice pay rules prevent an employer making unworked notice tax-free simply by calling it compensation. Pay in lieu of notice is taxable whether or not the contract provides for it.

Qualifying termination awards above £30,000 attract income tax on the excess, but not employee National Insurance. The employer pays Class 1A National Insurance on that excess. See HMRC’s termination payment guide.

Ask for gross amounts, estimated deductions and the expected net payment. Your adviser should check any clause making you repay the employer if HMRC later demands more tax. Neither you nor the employer can turn notice pay into tax-free compensation by agreement.

Settlement agreements: what you sign away

A settlement agreement trades specified claims for agreed terms. It can waive statutory employment claims only if the relevant legal conditions are met. Under section 203 of the Employment Rights Act 1996, these include:

• a written agreement identifying the particular complaints or proceedings being settled;
• advice on its terms, effect and impact on tribunal rights from a relevant independent adviser;
• insurance or indemnity cover for the adviser’s advice;
• identification of the adviser and a statement that the applicable statutory conditions are satisfied.

The adviser can be a qualified lawyer, a certified and authorised independent union adviser, or a certified and authorised advice-centre worker. An ordinary union representative is not automatically qualified to certify the agreement. Ask the employer to contribute to the advice cost.

An Acas-conciliated settlement, usually recorded on a COT3, is a different route. It does not require the same independent-advice formalities. Acas explains that agreed terms can bind you before you sign. Understand them before authorising agreement.

The Acas Code says you should normally have at least 10 calendar days to consider formal written terms and obtain advice, unless the parties agree otherwise. That is guidance, not an automatic statutory cooling-off period.

A “protected conversation” is not blanket secrecy

Section 111A generally keeps pre-termination settlement discussions out of ordinary unfair dismissal claims. It does not give the same protection against discrimination, whistleblowing, automatically unfair dismissal or breach-of-contract claims. Improper behaviour can also affect protection, to the extent the tribunal considers just. Separate “without prejudice” rules may protect genuine negotiations over an existing dispute. Save the messages and ask your adviser before using them as evidence.

Can you negotiate a better package?

Yes. You can counteroffer or refuse. There is no universal number of weeks’ severance you should receive. Your contractual rights, the strength of any claims, and what the employer wants settled matter more than an online rule of thumb.

1. Establish what is already owed. Keep statutory redundancy, contractual enhancements, notice and final pay separate from the extra offered for settling claims.
2. Ask your adviser to assess the claims. A flawed redundancy process, discriminatory selection or unpaid wages can change what the waiver is worth. A possible claim is not a guaranteed award.
3. Use your representatives. Give your union rep the policy and offer. Ask about a collective package, a better reference, payment timing and an advice-cost contribution. Check any non-cash benefit’s tax treatment.

In Great Britain, proposals to make 20 or more employees redundant at one establishment within 90 days trigger collective consultation. Consultation must start in good time and at least 30 days before the first dismissal takes effect for 20 to 99 redundancies, or 45 days for 100 or more. It is not simply a requirement to hold meetings for that many days.

The employer must consult the recognised union or elected employee representatives and notify the Secretary of State using form HR1. Since 6 April 2026, failure to meet collective consultation duties can lead to a protective award of up to 180 days’ pay per affected employee. That is a maximum, not an automatic payment. Read our collective redundancy guide.

When the usual rules need a closer look

Less than 2 years’ service

You normally get no statutory redundancy pay. You may still have contractual redundancy rights, notice pay, wages and holiday pay. Lack of redundancy entitlement does not make discriminatory dismissal or other automatically unfair reasons lawful.

Voluntary redundancy, resignation and retirement

Volunteering for redundancy can still qualify if the employer dismisses you for redundancy. Get the reason for termination and each payment confirmed. Simply resigning or choosing to retire does not normally qualify. An early-retirement offer needs checking for redundancy terms, pension consequences and any waiver. Do not resign early assuming an offer letter guarantees every entitlement.

Suitable alternative work

You can lose statutory redundancy pay if you unreasonably refuse suitable alternative employment. Suitability depends on the work, pay, hours, status, location and your skills and circumstances. A cleaner offered shifts at a distant site should explain the travel problem in writing, not rely on a manager’s verbal assurance.

There is normally a 4-week trial of alternative employment. If it is unsuitable, tell the employer within the trial period and record why. A training extension must be agreed in writing before the trial starts. Take advice before refusing or staying beyond the trial. See GOV.UK’s alternative employment guidance.

Agency, zero-hours, fixed-term and part-time work

Part-time and zero-hours employees can qualify on the same statutory terms. A fixed-term contract expiring without renewal is a dismissal, but redundancy pay also needs a redundancy reason and qualifying service. Expiry alone is not enough.

If you work through an agency or umbrella company, ask an adviser to establish who employs you, whether you have employee status and whether your employment has ended for redundancy. An assignment ending at a warehouse does not itself establish all those facts. A person with worker status but not employee status has no statutory redundancy entitlement, though holiday pay and contractual rights may still exist. The genuinely self-employed have no statutory redundancy entitlement. See our agency worker guide and employment status guide.

Lay-off or short-time working

There is a separate statutory redundancy route for eligible employees laid off without pay or put on less than half a week’s pay for at least 4 consecutive weeks, or 6 non-consecutive weeks within 13 weeks. Written notice of intention to claim is normally needed within 4 weeks of the last relevant non-working day; the employer has 7 days to give a counter-notice. Further resignation and notice rules apply. Get advice before resigning, because missing a step can lose the payment. See our lay-off guide.

An insolvent employer

In Great Britain, apply through the Redundancy Payments Service using the details supplied by the insolvency practitioner. The state scheme can cover statutory redundancy and certain unpaid wages, holiday and notice payments, subject to its limits and eligibility rules. It does not guarantee your full contractual severance package. Keep evidence of any balance owed and ask the practitioner how to register it as a creditor claim.

If your employer will not pay

Write a dated claim stating the payment you seek, the calculation and when your employment ended. Keep a copy and proof that the employer received it. For statutory redundancy in Great Britain, section 164 normally requires a qualifying step within 6 months of the relevant date, usually when employment ends. A written claim to the employer is one such step. A tribunal can allow a late step in the following 6 months where it is just and equitable, but do not rely on that discretion.

If the employer disputes or ignores the claim, contact Acas early conciliation promptly before bringing a tribunal claim. Conciliation can affect the tribunal deadline. It does not mean you have 6 months of negotiations, and writing to the employer does not preserve every other employment claim.

The general GB tribunal time-limit extension took effect on 1 October 2026, but earlier events can still have a 3-month limit. Scotland’s tribunal breach-of-contract limit does not increase to 6 months until 9 November 2026. Ask an adviser to calculate each deadline, especially if you also claim notice, wages, discrimination or unfair dismissal. See our tribunal claim guide.

Your union can help assess the offer and the claim. Usdaw organises in retail and distribution; UNISON, Unite and GMB represent workers across care, health, food, hospitality and logistics. IWGB organises in sectors including gig work and outsourced services. Check the union for your workplace and its legal-support rules. Citizens Advice, Citizens Advice Scotland and law centres are other advice routes.

Scotland and Northern Ireland

England, Wales and Scotland share the statutory redundancy formula and £751 weekly cap. Scotland has its own tribunal administration. Contractual claims may go to a tribunal within its jurisdiction or to the sheriff court; England and Wales have county court routes. Do not assume the deadlines are interchangeable.

Northern Ireland’s right comes from the Employment Rights (Northern Ireland) Order 1996. The 2-year qualifying rule, age bands and 20-year service cap match, but the weekly cap is £783 from 6 April 2026, giving a £23,490 maximum. See nidirect and the Northern Ireland limits order.

Use the Labour Relations Agency rather than Acas and the Industrial Tribunals rather than GB employment tribunals. NI employers notify the Department for the Economy about collective redundancies. Do not import GB reforms, including the 180-day protective-award maximum or the October tribunal deadline changes, into an NI claim. Our Northern Ireland guide explains the separate system.

What has changed and what is still scheduled?

This guide states the law as at 1 October 2026. The following reforms concern Great Britain, not automatically Northern Ireland.

1. 6 April 2026In force. Higher protective award

   The maximum award for failure to consult collectively is 180 days’ pay. Separately, the annual statutory redundancy weekly cap rose to £751.

2. 1 October 2026In force. Tribunal time limits extended

   General claim time limits increased to 6 months. Earlier events may still carry the 3-month limit. Statutory redundancy already had its own 6-month claim rules.

3. 9 November 2026Scheduled. Scottish contract-claim limit

   The tribunal time limit for breach-of-contract claims in Scotland is due to increase to 6 months.

4. 1 January 2027Scheduled. Ordinary unfair dismissal after 6 months

   The qualifying period is due to fall from 2 years to 6 months, and the compensatory-award cap is due to go. The 2-year qualifying rule for statutory redundancy pay remains.

Questions people ask

Does every employee get severance when a job ends?

No. There is no general separate severance entitlement. You receive the statutory and contractual payments you qualify for. Additional compensation depends on an agreement. Resigning does not normally entitle you to statutory redundancy pay.

Can your employer pay less than statutory redundancy if you sign?

A valid settlement agreement or conciliated settlement can waive a redundancy claim, including a shortfall. An ordinary signature on a receipt does not satisfy those formalities. Get independent advice before accepting less than your entitlement.

Is the first £30,000 of any package tax-free?

No. The exemption applies to qualifying termination payments, combined. Notice pay, wages, holiday pay and bonuses are normally taxed as earnings. They do not become exempt because the employer labels the whole payment severance.

Do you have to use a solicitor for a settlement agreement?

You need a relevant independent adviser with the required insurance or indemnity cover. A qualified lawyer, certified and authorised independent union adviser or certified and authorised advice-centre worker can qualify. Acas conciliated settlements follow different rules.

Can fixed-term or zero-hours employees get redundancy pay?

Yes, if they meet the employee-status, service and redundancy conditions. Non-renewal of a fixed-term contract counts as dismissal but must be for redundancy to trigger the payment. A zero-hours label does not by itself decide employee status.

How quickly should you act if redundancy pay is missing?

Write to the employer now and keep proof. The usual statutory redundancy claim period is 6 months from the relevant date, generally when the job ends. Contact Acas in GB or the Labour Relations Agency in NI promptly. Other claims and transitional rules can have different deadlines.

Sources

1. Redundancy: your rights, statutory redundancy pay and lay-off claims, GOV.UK
2. Calculate your redundancy pay, GOV.UK
3. Employment Rights Act 1996, Part XI, legislation.gov.uk
4. Employment Rights Act 1996, section 164, claims for redundancy payment, legislation.gov.uk
5. Employment Rights (Increase of Limits) Order 2026, legislation.gov.uk
6. Redundancy notice periods, GOV.UK
7. Suitable alternative employment and trial periods, GOV.UK
8. Employment Rights Act 1996, section 203, restrictions on contracting out, legislation.gov.uk
9. Code of Practice on settlement agreements, Acas
10. Settlement agreements, Acas
11. Early conciliation, Acas
12. How early conciliation works and when a COT3 becomes binding, Acas
13. Tax on termination payments, GOV.UK and HMRC
14. Post-employment notice pay, HMRC Employment Income Manual
15. Claim redundancy and other money owed by an insolvent employer, GOV.UK
16. Redundancy consultation, GOV.UK
17. Employment Rights Act 2025, section 30, protective awards, legislation.gov.uk
18. Employment Rights Act 2025, in-force and scheduled changes, Acas
19. Employment Rights (Northern Ireland) Order 1996, Part IX, legislation.gov.uk
20. Redundancy pay in Northern Ireland, nidirect
21. Employment Rights (Increase of Limits) Order (Northern Ireland) 2026, legislation.gov.uk
22. Payment of tribunal awards, 2013 study, IFF Research for the Department for Business, Innovation and Skills, executive summary and chapter 5