Redundancy Help

Step-by-step guide to redundancy

Redundancy Help

Been made redundant? You’ll hopefully find new work quickly, but losing your job can be a huge financial hit. It can affect your ability to pay bills and bring about an urgent need to re-evaluate spending.

This is a step-by-step guide to planning for redundancy, your rights to compensation, and tips to minimise the impact if it’s happening to you.

In this guide

How to prepare for redundancy

Redundancy 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!).

Don't let it 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.

A must-read for all

This guide doesn't just apply for those who've been given notice or heard rumours. Continued cuts in public spending and its consequences mean it's sensible for everyone to take a moment to think how they'd be affected, and put a contingency plan in place if possible.

The threat of redundancy may be more likely in a recession, but it's never a bad idea to have plans in place should you lose your job. Budget and make sure you know where you'd stand if it did happen and you'll save yourself the panic if your job did then become uncertain.

Is redundancy looming in your company?

If you've been told redundancy is 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 you're about to lose your job, 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 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.

  • 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

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.

Redundancy and payment protection

There are a number of types of insurance policy that will cover your income, or just certain loan repayments, if you lose your job.

However it's important to understand one thing...

If redundancy's foreseeable when you start a policy, then it may not pay out if you are made redundant

For example, if there's been an announcement in the firm that some jobs are going or it's been rumoured strongly, then it's possible this will disqualify you from claiming, meaning a policy is a waste of money. The same's usually true if you take voluntary redundancy, so check first.

If you think your job may be at risk talk to your employer and find out how high the risk is. It's unlikely a rumour of job losses, even if it's through a government announcement if you work in the public sector, will count as notice but be aware, many grey areas exist.

Applicable insurance types include:

  • Mortgage Payment Protection Insurance. This is designed to cover your mortgage repayments and related home costs in the event of accident, sickness or unemployment. See the MPPI guide.

  • Payment Protection Insurance. These policies cover repayments of other debts, again in the event of accidents, sickness and unemployment.

    Often they're mis-sold and massively overpriced, but the product is still a good one, and if bought through standalone providers can be decent value. See the Loan Insurance guide.

  • Unemployment cover. It's becoming harder to find, but it's also possible to take out specific ‘unemployment only’ cover as a standalone policy.

    This insurance offers a regular monthly sum to cover your normal outgoings, including mortgages and bills, for up to 12 or 24 months. As a rule they tend to pay out a maximum of around £1,500 or 50% (though we found some offering up to 70%) of your gross salary - many allow you to specify the sum.

    This type of insurance is incredibly valuable in the right circumstances, but there've been huge numbers of mis-selling cases, and many have paid massively over the odds. If you're considering a policy, check all the terms carefully to see if it's suitable.

Been made redundant already?

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. More info on unfair dismissal on

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:

  • Notice of termination. Your employer should give proper notice of termination (in other words, tell you long enough in advance). If there is nothing in your contract, the minimum is a week if you've been there under two years, then a week for each complete year (up to a maximum of 12 weeks). Yet your employer may give you pay in lieu of notice, or simply pay you for the period without you attending.
  • 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 payout. A redundancy payout is effectively compensation for your loss of work. The first £30,000 is tax-free (see below) though anything above this is taxed at your marginal rate.

Many firms have their own policies which are much more generous than the legal minimum, so check your contract or staff handbook and see what it says. If it's not specified then it will usually follow the legal minimum (see below).

Statutory redundancy pay

After two years with your employer, you'll qualify for a minimum statutory redundancy payment. 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 your age and longevity at the company.

  • Under 22. Half a week's pay for each full year of continuous service you're aged under 22
  • Aged 22-40. A week's pay for each year of continuous service that you're aged 22-40
  • Over 41. A week and a half's pay for each year of service you're aged over 41

However before you start adding it up, it's based on a maximum salary of £25,428 a year thus...

A ‘week's pay’ can legally be capped at £508, so even if you earn more, you aren't entitled to it under the statutory payment.

The limit is currently £508 a week (£530 in Northern Ireland) if you were made redundant on or after 6 April 2018. 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 £15,240 (£15,000 in Northern Ireland). 

If you were made redundant before 6 April 2018, 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 8 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 ten weeks payout of £300, which is £3,000.

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

The first £30,000 of redundancy pay is tax-free

Whether it's statutory (see above) 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 nothing that if you're asked to leave work before your notice period ends but keep getting paid - known as 'payment in lieu of notice', you will pay tax as those payments are treated as earnings.

What if my company's gone bust?

If the company has no money left, then you'll need to claim Statutory Redundancy Pay (SRP) which is organised via the insolvency practitioner dealing with your employer's administration.

The money you get will come from the National Insurance Fund, a giant government insurance scheme set up after World War II 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.

It's not just redundancy pay

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 insolvency practitioner. Unlike redundancy pay, this is taxed and uses the same ‘maximum’ rule of no more than £489 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

To apply for Statutory Redundancy Pay, you'll need to contact the insolvency practitioner or call 0330 331 0020 to request a copy of a RP1 form (see the Insolvency Service website for more details) and send it back to the practitioner dealing with your company's insolvency. 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 call the Redundancy Payments Helpline on 0330 331 0020.

Your legal rights

The legal rules surrounding redundancy are complex, and this is a MoneySaving not an employment site, but in general terms the following should take place:

  • Before redundancy you should've been consulted.
  • You should be given the correct amount of notice.
  • All untaken holidays should be paid.
  • The company should have considered whether there was an alternative to redundancy. Is there another job in the firm you've the skills to do?
  • The process for picking who is redundant should be fair. If the company decided to choose you on a discriminatory basis, then your redundancy is unfair, giving you grounds to complain and even sue.

Additionally, if more than 20 staff are to be let go, the law says there should be a period of collective consultation between the employer and ‘appropriate’ employee representatives (usually a union).

Further reading: For more on the legal issues surrounding redundancy read the Citizens Advice redundancy section.

Where to get free help

There are a lot of agencies set up to provide help and advice for those facing redundancy:


 The Advisory, Conciliation and Arbitration Service gives free advice on all employment issues. Call it on 0300 123 1100 (8am to 8pm Mon to Fri and 9am to 1pm Sat)                                                                                                                            

Labour Relations Agency (LRA)

Those in Northern Ireland can call the LRA for free advice on all employment issues. Call it on 028 9032 1442 (9am to 5pm Mon to Fri).

Citizens Advice Bureau

Your local bureau can give free employment advice.

Find your nearest Citizens Advice

The redundancy checklist

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

  • Are you entitled to benefits?

The benefits and tax-credit nets spread further than you think; even a few families with income in the seventy thousand pound range are eligible for some benefits. So it's important to ensure you're getting all you're entitled to.

This can include tax credits, housing benefit and council tax support. See full details in the Benefits Check-up guide, but remember to answer the questions as if you're not working.

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

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.

The main ‘out-of-work’ benefit is jobseeker's allowance (JSA) and there are two versions of this, contribution-based JSA and income-based JSA. Which you get will depend on your circumstances:

Contribution-based JSA: To get this you need to have been paying national insurance for two years, but anyone can claim it for up to six months.

Income-based JSA: This is based on your household income so any insurance cover, savings or redundancy payments are taken into consideration. If you get this version you can claim it for longer than 6 months; indeed, you can claim until you get a new job.

Simply call up 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 then 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).

  • Budget, budget, budget

If you've not already done so, now is the time to sit down and do a full budget (see the free Budget Planner) 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.

  • Deal with your debts

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 the full Problem Debts 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 for hidden insurance

Check whether you've any insurance to help make payments on your mortgage, loans or credit cards. This is one case where you may be a lucky victim of mis-selling. Some loan companies added expensive payment protection insurance (PPI) to loan costs, so you may have a policy without knowing it.

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 very important to check the terms straight away as taking temporary work may invalidate your claim.

If you are turned down for a claim due to a reason you did not expect, check to see if you have been mis-sold the policy (see the PPI Reclaiming Guide), in which case you can reclaim the cost of the insurance.

  • Check for cheaper car insurance

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). Cheap Insurance Guides: Car, Van, Motorbike.

  • Struggling with your mortgage?

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 the 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.

  • Other help from the government

There are a few ways which may be able to provide you with interest-free borrowing rather than getting commercial debt.

Local council support schemes: From April 2013 each local authority is responsible for providing help to its residents struggling with an emergency, such as you or your families’ 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 or who is eligible. For example, some may give furniture or food grants while others may give cash. Contact your local council or just Google "" to find out it's procedure.

Budgeting loans and advances: These are only for benefit recipients, but 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 If you have means to get money any other way (using savings, for example), you won't qualify. Up to £812 (£1,500 in NI) can be borrowed at one time for each loan and although you must repay them, the amount depends on what you can afford.

Sadly demand for these are extremely high at the moment and there isn't a bottomless pot of money, so if the council or Jobcentre decides your circumstances aren't urgent or you're not struggling, you may not get anything. But if you think you qualify and really need the cash, it's definitely worth a shot.

  • Grab grants for those on low income

There's millions available in grants for people earning under £16,190 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.

  • Notify the tax credits office.

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.

  • Start job hunting

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, browse the internet (like recruitment sites) for job hunting advice or check the library for a book. There are lots of top tips, info and support from other MoneySavers in the Employment, Job Seeking & Training section of the forum.

If you can't find the job you want straight away, 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 the Boost Your Income guide.

  • Learn something new

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.

  • Maximise the interest on redundancy payouts

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.

  • Redundancy and relationships

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.

f 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).

  • 50% off rail travel – and help with other costs too?

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.

  • Free dry cleaning for job interviews

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.

  • The light at the end of the tunnel

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.