Redundancy help

Step-by-step guide to redundancy

Losing your job can be a huge financial hit, affecting your ability to pay bills and keep afloat. Whether redundancy is long anticipated or comes out of the blue, it's an uncomfortable situation to be in. But there are ways you can protect yourself by planning ahead. This guide shows you how.

Thanks to Max Winthrop, partner at Short Richardson & Forth and the chair of the Law Society's employment law committee, for fact-checking this guide.

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Don't let the prospect of redundancy overwhelm you

Losing your job brings many pressures: worries over mortgage payments, fears of finances falling apart, the stress of job-finding or strain on a relationship (though some may feel the joy of release from a miserable job).

However, it's important that you don't let this take hold and stop you moving on to another job, career change, training or even taking time out if you can afford it.

By preparing beforehand, you can batten down the hatches and hopefully bounce back quicker and stronger.

I had the unexpected news that a well-known bank I've worked at for 10 years are making me redundant. Thanks to your campaigning, I've got savings prepared for this. I thought I was being crazy as never in a million years did I think I'd lose my job from such a reputable company. I can't imagine not having that money on top of the stress of this situation.

Emma, via email

At risk of redundancy? Here's how to prepare

If you've been told it's a possibility or think it might be heading your way, then you're in a much better position if you take action before it happens.

Sort your finances NOW

Nervous about losing your job but not in any immediate danger? Think as if it's about to happen, in order to protect yourself as best you can.

  • Do a debt audit. Your credit score while working will usually be much better than if you lose your job, as the loss of income means lenders will be less keen to give you credit.

    Therefore, if your existing debts aren't at cheap rates, it's best to apply sooner to try to cut their costs. See the Best balance transfersBest bank accountCheap loans and Mortgage finding guides for more info.
  • Pay off debts. If you've any spare savings, use them to clear outstanding credit cards or loans. Having debts hanging over you during redundancy is a nightmare. The cost of most debts vastly exceeds the interest earned on savings.

    Yet, don't use all your money paying off debts. It's important you keep access to emergency funds if you need them. If you decide to repay debts, but it takes longer than planned to find a new job, you may need money later on for day-to-day living.

    More info in Should I repay my debts?

  • Check out mortgage help schemes. If you have a mortgage, work out what level of protection you have if you were to lose your job. Both private, work-based and government schemes may help. See the Mortgage arrears guide for more info, plus check if your mortgage lender can offer you tailored support.

  • Boost your income. There are a host of things you can do to bring in cash in the short term, from mystery shopping to flogging your CD collection. See the Boost your income guide for ideas.

  • Do a budget & money makeover. There's nothing more important than running through all your finances to see what bills you can cut (see the Money makeover guide) and doing a full budget to ensure you're spending within your means (see the Free budget planner). The Stop spending guide will also show you lots of little ways to cut back.

To be truly prepared, if losing your job's likely, start living now as if you'd already lost it. Cut back on everything, and put spare cash away to help you live when there's less income. This way while you're living tighter for longer, the depths won't be as deep.

Join a trade union?

If your company or industry has a union and you're not a member, it's worth considering joining. Most will be able to advise on, and barter for, better redundancy packages on your behalf and provide free advice and guidance on your rights. Find the appropriate union and what it provides using the TUC's union finder tool.

Network and build contacts

While now might not be the ideal time to look for a new job, always keep your ear to the ground and see what else is available; whether it's openings elsewhere in your company or at a rival. Many job positions become available long before they're advertised publicly, so be prepared to pounce.

Now could also be the time to push your luck where you might not have had the confidence before. Don't be afraid to ask if work's available even if you're not sure you have the relevant experience – if you don't ask, you don't get.

Remember, while 'last in, first out' no longer applies, you have fewer employment rights in the early stages of a new job than you do later on. So if you move to a new job, then redundancy hits, there is a bigger risk to your security than if you'd stayed put.

Plus if you're likely to be offered voluntary redundancy and a big payout, or have long service at a company, jumping ship may mean you lose all that. Weigh it up carefully.

If you are serious about moving jobs beforehand, the Department for Work and Pensions has launched a job help portal. This includes advice for jobseekers and those facing redundancy, and lists 10,000s available jobs.

If taking out a new insurance policy check whether it'll cover redundancy / unemployment

There are several types of insurance that would usually cover you for redundancy: mortgage payment protection insurance (MPPI), payment protection insurance (PPI), accident, sickness and/or unemployment (ASU) as well as standalone unemployment cover.

All work similarly, where the cover will pay out an agreed sum for a set period in the event of an accident, sickness or unemployment. In short:

  • Mortgage payment protection insurance. This is designed to cover your mortgage repayments and related home costs.
  • Payment protection insurance. These policies cover repayments of other debts, in other words, credit card, loan etc.
  • Accident, sickness and/or unemployment cover/income protection. As it says on the tin – but the amount is paid to you, so you can decide what to spend it on.

At the onset of the coronavirus pandemic, many providers withdrew unemployment cover from their insurance policies. While some are now beginning to offer this cover again, make sure you check whether any new policy you're considering includes unemployment protection.

Customers who took out a policy prior to the pandemic shouldn't have been affected by this.

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Already been made redundant? Know your rights when it comes to pay, notice & holiday

Whether you've just been given your notice, or you've already left work, it's important to keep in mind the old adage...

“It's your job that's been made redundant, not you.”

If you're selected, the first thing to remember is that your employer must treat you fairly. There are laws to protect you from being simply tossed aside, so it's important to double-check that your employer has played it fair. If not, you could be in line for compensation. There's more info on unfair dismissal on the website. 

The situation is different if your company has gone bust – see full details below.

What redundancy payout are you entitled to?

There are three main types of payout you can expect:

Payment in lieu of notice

Your employer should give you between one and 12 weeks' notice of your redundancy (depending on how long you've been at the company), during which you are entitled to be paid. However, your employer may pay you instead of giving the proper notice, or simply pay you with no need for you to go in to work.

Holiday pay

If you have accrued but not used holiday days, you are entitled to be paid for these (or given the option to use them in your final weeks).

Redundancy pay

A redundancy payout is essentially compensation for your loss of work. Here's how it works:

  • You get statutory redundancy pay as a minimum, provided you've worked for your employer for two years or more. The limit is currently £643 a week if you've were made redundant on or after 6 April 2023. This has gradually increased from £350 in 2009.

    Exactly what you get depends on how long you've been in your job, with length of service capped at 20 years (so any extra years don't count). The maximum amount of statutory redundancy pay you can get is £19,290. We've full details on it in the questions below.

  • Many firms have their own policies that are more generous. Check your contract or staff handbook and see what it says. If it's not specified then it will usually follow the legal minimum, as above.

  • The first £30,000 is tax-free. Anything above this is taxed at your marginal rate of income tax.  

Quick questions

  • How much can I get through statutory redundancy pay?

    After two years with your employer, you'll qualify for a minimum statutory redundancy payment (the 'redundancy payout' mentioned above). If you've worked there for less than two years, you've no right to any recompense.

    For those who have at least 24 months' continuous service, your entitlement depends on how long you worked for the company, and how old you were during this time.

    • For each full year you were under 22, you'll receive half a week's pay.
    • For each full year you were aged between 22 and 40, you'll receive a week's pay.
    • For each full year you were aged 41 or over, you'll receive a week-and-a-half's pay.

    So if you're aged 45, and you've been working for an employer for 10 years, you should be entitled to six years at a week's pay, and four years at a week-and-a-half's pay, making a total of 12 weeks' pay.

    Before you start adding it up, it's based on a maximum salary of £28,288 a year, thus...

    A 'week's pay' can legally be capped at £643, so even if you earn more, you aren't entitled to it under the statutory payment.

    The limit is currently £643 a week if you were made redundant on or after 6 April 2023. This has gradually increased from its level of £350 in 2009.

    Length of service is also capped at 20 years (so any extra years don't count towards it). The maximum amount of statutory redundancy pay you can get is £19,290. 

    If you were made redundant before 6 April 2023, you will get lower amounts. 

    Note it isn't the age you are now that counts, but the age during each year you've been in your job. Here's an example to explain:

    Bob's been a builder with CanYouFixIt Construction for eight years earning £300 a week. Now, aged 45, he's been made redundant.

    As he worked there for four years aged under 41, he gets a week's pay for each of those. He did four years aged 41 or older, so he gets a week-and-a-half's pay for those. Thus overall he'll get 10 weeks' payout of £300, which is £3,000.

    To work out exactly what you're entitled to use the Government's calculator.

  • Do I need to pay national insurance contributions on redundancy pay?

    Whether it's statutory or contractual redundancy pay, the first £30,000 you receive is tax-free, and no national insurance contributions are deducted either. Do check you don't find yourself paying these, as some smaller companies without a human resources department might not know the rules.

    If you have been given any additional benefit, such as a company car or laptop, this is usually included in your £30,000. If you go over this limit and/or are a higher rate tax payer you may need further advice. The Government's redundancy overview is also a useful resource.

    It is worth noting that, as of 2018, payments in lieu of notice and/or holiday are subject to tax and national insurance contributions.

What if my company's gone bust?

If the company has no money left to offer redundancy pay, then you'll need to claim your statutory redundancy pay from the Redundancy Payments Service (part of the Insolvency Service). 

The money you get will come from the National Insurance Fund, a giant Government insurance scheme set up after World War Two into which we all pay as we work. Once that's done, this fund will try to reclaim the cash from the company's assets.

You may also be entitled to other pay too...

If you're owed wages or holiday pay from a firm that's gone bust, you can also claim the following from the National Insurance Fund via the Redundancy Payments Service. Unlike redundancy pay, this is taxed, though it does use the same ‘maximum’ rule of no more than £643 a week. 

  • Wages. Up to eight weeks' unpaid wages can be claimed including a payment for a protective award for failing to consult collectively.
  • Holiday pay. Up to six weeks' unpaid wages can be claimed.
  • Compensatory notice pay. One week's pay after one calendar month's service, and then one week's pay per year of service up to a maximum of twelve weeks.
  • Pension. Any unpaid pension contributions, though you'll need to contact the insolvency practitioner to help you claim.

Any further holiday pay and wages owed will be billed as 'preferential debt'. This means they'll be paid before other debts if – and only if – there's enough money when the eventual assets of your employer are totted up and divided out.

How to claim and where to get help when your company's gone bust

To apply for statutory redundancy pay, you'll need to get a claim number from the insolvency practitioner, with which you will then need to make a claim on the Insolvency Service's website. It usually takes about three to six weeks for you to receive your payment.

If you've doubts about the way your employer may have calculated your statutory redundancy pay, you can email the Redundancy Payments Service.

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The redundancy checklist

This checklist is full of options to sort your finances and help you get back on track if you've been made redundant.

Which will work depends on your circumstances.

Contact the Jobcentre ASAP as payments are often delayed; the sooner you start, the better.

  • It's important to ensure you're getting all you're entitled to as soon as possible as some benefits can't be backdated very far. It's quick and easy to see what you could get with our Benefits check guide – and remember to answer the questions as if you're not working.

    The main benefits you might get if you're made redundant are: 

    • Universal credit 
    • Jobseeker's allowance

    Don't be shy about this – it's money you're entitled to. Receiving benefits also pays your national insurance contributions, which can have an impact on your eventual state pension. You'll be asked to declare any savings, including your redundancy payment, so that your benefit start date can be determined and you're not overpaid, yet this is usually the day after your redundancy notice period ends.

    Universal credit

    Universal credit is the key benefit for anyone on low income or unemployed. It is means-tested, so any savings or capital you (or your partner, if you have one and live together) have over £6,000 – and this includes redundancy pay – WILL affect the amount you get.

    Any savings of more than £16,000 mean you're ineligible for any payment at all. If you think you could be entitled, apply soon –universal credit can only be backdated by one month. You can find out more in our Universal credit guide. 

    Jobseeker's allowance

    The main 'out-of-work' benefit is jobseeker's allowance (JSA). There are three versions of this: 'new-style' contribution-based JSA, income-based JSA and a third, 'old-style' contribution-based JSA, which is only available to a small number of people who have been recently receiving a means-tested benefit and are severely disabled. Which you get will depend on your circumstances:

    'New-style' contribution-based JSA: This is the main type of JSA generally available to new claimants. To get this, you need to have been paying national insurance for two years, and you can claim for a maximum of 28 weeks. Unlike universal credit, it is NOT means-tested, so any savings or capital – including redundancy payments – will not be taken into account. 

    Income-based JSA: For new claimants, income-based JSA has now been replaced by universal credit except as a top-up in a very small number of old-style contributory JSA claims. 

    Call Jobcentre Plus on 0800 055 6688 to find out how to make a claim (or claim online) as it can take several weeks, sometimes months, to get the payments sorted. If you're in need of emergency cash in the short term, ask about a 'short-term advance' (where money you'll be due is paid early, but obviously you don't then get it again later).

  • If you've not already done so, now is the time to sit down and do a full budget (see our free Budget planner guide) and then the Money makeover and Stop spending guides. You can slash the costs of many day-to-day expenses from petrol to prescriptions and can prioritise your expenditure to stick within your means.

    You should also start to ask yourself the tough questions about whether you 'need' or 'want' things. A spending diary can help you keep track of where your money is going at the moment.

  • If you're having financial problems, don't ignore red letters. Contact your creditors to discuss the problem with them as soon as possible. They may be able to temporarily accept lower monthly payments. If you're concerned about your debts, read our full Debt problems guide.

    When mental health problems are involved, some special solutions apply. Our free Mental health & debt help PDF booklet has tips to help you handle debts when stressed, work with banks, get free one-to-one debt counselling as well as specific tips for bipolar and depression sufferers and more. There's also the independent charity Money and Mental Health Policy Institute, launched by Martin last year, to help those struggling with both mental health and debt.

    Also check out the Debt free wannabe forum where there's lots of useful advice from other people in the same situation. You can also post details of what you spend, for others to suggest ways that you can cut back.

  • Check whether you've any insurance that can help you. This is likely to be one of two different types:

    Payment protection insurance (PPI): It's been massively mis-sold in the past (so you may not know you have it), but if you do have a policy attached to your mortgage, loans or credit cards, it will pay the minimum monthly payment if you can't. Check that your policy covers unemployment as well as accident and sickness (most do). 

    PPI tends to pay out for one or two years, with the idea being you'll be re-employed (or have recovered from the accident/illness) by then. It's important to note that if you've reclaimed your PPI premiums, then it's likely your policy was cancelled and you won't be able to claim on it.

    Income protection insurance: This type of insurance isn't as common as it's not attached to other products – you have to take it out separately. It covers a certain payout per month in the event of you being made redundant. You'll usually know if you do have an income protection policy, but check paperwork just in case.

    If you do, make a claim as soon as you're out of work. Many policies are dependent on getting unemployment benefits and may require you to have been in work for a certain length of time. It's important to check the terms straightaway as taking temporary work may invalidate your claim.

  • Scandalously, the unemployed often (though not always) pay higher rates for their car insurance. You should inform your provider if you're out of work. If your policy's changed, see if it's worth cancelling and moving elsewhere, as you don't need to be at renewal to change insurer (though exit fees may apply). See our cheap insurance guides: car, van, motorbike.

  • There's one state scheme – Support for Mortgage Interest (SMI) – available to help if you're struggling to pay your mortgage. Full details are in our Mortgage arrears help guide.

    However, if you're struggling, first talk to your lender to see if it will help you manage your payments. Lenders must only use repossession as a last resort and have to prove they have done all they can to help struggling borrowers, so use this to your advantage.

  • There are a few ways you may be able to access help with job-hunting costs and interest-free borrowing.
    Help with training and travel costs, interview clothes, childcare and more: If you're claiming benefits and looking for work you can ask to get support to cover travel expenses, interview clothes and childcare via the 'Flexible Support Fund', a Government-funded grant. There's no minimum or maximum amount but what you'll get is determined by your work coach. Ask at your local Jobcentre about how to apply.
    If you're struggling financially, there are also a couple of schemes that may help...

    Council support schemes: From April 2013, each local authority is responsible for providing help to its residents struggling with an emergency, such as your or your family's health being at risk, not being able to afford to buy food, needing help to stay in your own home and coming out of care, hospital or prison.

    Sadly this is a postcode lottery. Each council can choose whether to offer financial help or not and who is eligible. For example, some may give furniture or food grants while others may give cash. Contact your council to find out its procedure.

    Budgeting loans and advances: These are only if you're receiving benefits, but they allow a wider range of borrowing, for instance to pay for clothes and furnishings.

    Apply for one via the Jobcentre or via the form on the website. If you have means to get money any other way (using savings, for example), you won't qualify. Up to £812 (£1,500 in Northern Ireland) can be borrowed at one time for each loan and although you must repay them, the amount depends on what you can afford.

  • There's millions available in grants for people earning a low income or entitled to benefits, though some stretch up the income scale. Check how to find them in our Low income grants guide.

    What's available? Help with furniture, holidays, training or occasionally even regular amounts to help cover household bills. Yet these can vary by region, occupation or even the pub you drink in.

    Need I pay the money back? Not if it's a grant – the money is simply yours to spend.

  • If you receive ANY tax credits – whether the working or childcare elements – if your circumstances change, it is absolutely vital that you...


    If you fail to tell the tax credits office that any of your circumstances have changed within one month, you could be fined £300 as well as paying back any overpayments. It may seem like a good thing to keep receiving extra payments, but it will cost you in the long run. Instead do a full benefits check-up for your entitlements.

  • Now is a good time to reassess your position and priorities. Are you happy in your career? Is now a good time for a change? Do you need time out? This information could affect your decisions, so it is useful to make some choices as soon as possible and see if you can get any freebies to help you along the way.

    Update your CV so you're ready to apply for other jobs, if you're still at work ask your HR department to have a look at this for you. If the whole company is closing, maybe due to an administration, ask for a written reference in advance.

    Some employers provide job-hunting help as part of a redundancy package. If yours doesn't, don't worry – there is help out there if you know where to look. If you're in England, Scotland or Wales, the Government has launched a new job help site, which currently lists thousands of jobs and offers tips, including which sectors are recruiting, how best to use your transferable skills and how to secure a new role.

    Recruitment sites are full of job-hunting advice and you can also check your local library for books on CV writing and interview preparation. There are lots of top tips, info and support from other MoneySavers in the Employment, Job Seeking & Training section of the MSE Forum.

    If you can't find the job you want straightaway, consider other options to increase your income such as temping, working part-time or taking in a lodger, which can earn up to £7,500 a year tax-free. See our Boost your income guide.

  • When jobs are difficult to come by, it's far better for your CV and personal development to have spent time out studying or adding to your skills than just being redundant.

    Check what courses local colleges or the job center offer and ask if you get a reduction in fees or some support with costs, many could be free. If you're considering returning to full time education, there are many grants and bursaries available (see the Education grants guide).

    There's also the telephone, online and face-to-face advice service from the National Careers Service for anyone wanting to find out about training, learning or changing jobs.

    Volunteering is also a way to add new experiences to your CV and stops you spending too much time home alone if it takes a while to find a new job, at the same time as being helpful to others.

  • If you've received a decent payoff as part of your redundancy package, you need to decide what to do with it. Normally paying off debts with savings is the key strategy, but having access to enough funds to meet your outgoings is also important.

    If you do have a lump sum, it's likely you'll want it somewhere with easy access, but of course you need to maximise every penny of interest so it's earning for you. See the Top cash ISA and Top savings guides for full details.

  • Losing your job can add stress to any relationship. Don't be afraid to tell family and friends your news. Hopefully they will be supportive, and will often be able to provide a sounding board.

    If you need help with relationship problems Relate has lots of useful info and if you're feeling depressed the Samaritans is always there to help, either through its website or on the phone number 116 123 (it's free to call).

  • If you've been claiming jobseeker's allowance for more than three months (and less than nine if you're 18-24 or 12 months if you're 25+), you're entitled to a Jobcentre Plus Travel Discount Card. This gets you a 50% discount on selected rail tickets (usually off-peak).

    You can also get this discount added to your Oyster card if you live in or near London. It gives you 50% off Oyster pay-as-you-go fares, or allows you to pay the children's rate for weekly or monthly travel cards.

    The cards are valid for three months – the expiry date will be printed on the front of the discount card.

    Jobcentre Plus staff also have a discretionary support fund that they can allocate to help with the cost of travelling to an interview, or travelling to work in your first few months.

    Don't know where your nearest office is? Find details of the closest Jobcentre Plus.

    As a gesture of goodwill, Timpson offers free dry-cleaning if you're unemployed and need an outfit cleaned for an interview. The offer is ongoing in all its supermarket branches and selected high street shops. There is no maximum value of clean and Timpson don't need any proof of unemployment – so the offer is being run on a trust basis.

  • Last but not least, take time out to do things you like and look after yourself. There are lots of ways to use your time which don't cost too much money (see the Days out vouchers and Days out forum for more info). You can even work out completely free – see our Gyms guide.

    When you do get a new job try living with the belt tightened as it was whilst you were skint! You can obviously let it out a couple of notches, but it can be the perfect opportunity to live slightly more conservatively.

    You may find you have a new outlook on work/salary/outgoings at the end of the process and your savings could be a lot healthier for it.

Thanks to the MoneySavers who contributed to the Great 'What to do in the event of redundancy' Hunt, which has contributed to this checklist.

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