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Redundancy


Statutory redundancy payment


Employees who are made redundant and have two years' continuous employment are entitled to a statutory redundancy payment. The amount of the payment is calculated in the same way as the basic award for unfair dismissal, according to a formula based on the employee's age, length of service and week's pay (section 162, Employment Rights Act 1996). There is no minimum payment. For the statutory limits on a week's pay, see Week's pay.

Guarantee payment


During periods of lay-off or short-time working an employee may be entitled to a statutory guarantee payment, which is calculated by multiplying the number of normal working hours on the workless day by the guaranteed hourly rate. For more information, see Practice note, Redundancy (6): lay-off and short-time working.


Statutory guarantee payments are subject to a maximum daily limit (section 31(1), Employment Rights Act 1996). The limit is adjusted annually by the Secretary of State in line with RPI under a formula set out in section 34 of the Employment Relations Act 1999. There is no minimum payment. The rate from 6 April 2020 was prescribed by the Employment Rights (Increase of Limits) Order 2020/205.

Failure to inform or consult over collective redundancy


The maximum protective award which can be awarded for a failure to inform or consult over a collective redundancy is 90 days' gross pay per dismissed employee (section 188, Trade Union and Labour Relations (Consolidation) Act 1992). The statutory limit on a week's pay does not apply and there is no minimum award.