UK Unemployment Set for Sharpest Rise in the G7: Your Statutory Redundancy and Universal Credit Rights

Last reviewed: 4 June 2026

The OECD report is direct about the source of the labour market weakness. Demand for workers has continued to slow, especially in sectors most exposed to higher minimum wages and to the increase in employer National Insurance contributions that took effect in April 2025. Hospitality, retail, social care and parts of manufacturing are carrying the largest share of the slowdown. Younger workers and the long term unemployed are concentrated in those sectors, which is one reason the NEET count (people aged 16 to 24 not in education, employment or training) has passed one million.

This article does not predict whether the OECD is right. It sets out the practical statutory framework that applies if you are made redundant, so the calculation is in your hands before the conversation with HR happens.

Statutory redundancy pay: the formula

Statutory redundancy pay is set in primary legislation under the Employment Rights Act 1996. The entitlement applies after two years of continuous service with the same employer. The calculation uses three variables: age, length of service, and weekly pay. Weekly pay is capped at 700 from 6 April 2025, applied to a maximum of 20 years of service.

The age multipliers are: half a week's pay for each full year worked under age 22; one week's pay for each full year worked from age 22 to 40; one and a half weeks' pay for each full year worked at age 41 and above. The maximum statutory payment is 20 years of service at the higher age multiplier of 1.5 weeks, capped at 700 per week, which gives a statutory ceiling of 21,000.

Many employers offer enhanced redundancy terms above the statutory minimum, typically expressed as a multiplier of monthly salary or a higher weekly pay cap. Check the contract of employment, the staff handbook, and any collective agreement before negotiating. Enhanced terms are contractual and binding.

Notice pay and the tax position

Statutory notice is one week per full year of service up to a maximum of 12 weeks. An employer can require you to work notice, place you on garden leave, or make a payment in lieu of notice. All three are taxable as employment income.

The first 30,000 of genuine redundancy pay is exempt from income tax and from National Insurance under the Income Tax (Earnings and Pensions) Act 2003 section 401. Any sum above 30,000 is taxable as employment income in the year of payment and is subject to employer Class 1A National Insurance contributions. Pay in lieu of notice is fully taxable from the first pound. Holiday pay accrued but not taken is fully taxable.

The Universal Credit five week wait

The biggest cash flow risk in a redundancy event is not the pay packet itself. It is the gap before Universal Credit (UC) reaches the bank account. The standard UC processing time is approximately five weeks from claim to first payment. The Department for Work and Pensions runs an advance payment scheme for claimants who cannot wait. The advance is recovered from future UC payments over up to 24 months. Eligibility is automatic in most redundancy cases.

UC entitlement is means tested. Redundancy pay above 16,000 in savings can reduce or cancel the entitlement, although certain pension scheme transfers and some property holdings are disregarded. Savings between 6,000 and 16,000 reduce UC at 4.35 per month per 250 of capital above 6,000. The interaction between the 30,000 tax free redundancy threshold and the 16,000 capital threshold for UC is the most common point of confusion, so the practical sequence to check is: confirm the redundancy figure, work out what part is tax free, calculate what proportion sits in savings after tax, and then run the UC entitlement calculator.

Contribution based Jobseeker's Allowance

New style Jobseeker's Allowance is a contribution based benefit unaffected by savings. It pays up to 92.05 a week for up to 26 weeks and runs alongside UC. Eligibility requires Class 1 National Insurance contributions in the two tax years preceding the claim. For most workers laid off after a sustained period of full time employment the contribution record is straightforward.

Collective consultation: when does Section 188 apply

The Trade Union and Labour Relations (Consolidation) Act 1992 section 188 requires an employer proposing to dismiss 20 or more employees as redundant within 90 days at one establishment to consult with appropriate representatives. The minimum consultation period is 30 days for 20 to 99 redundancies and 45 days for 100 or more. Failure to consult properly can give rise to a protective award of up to 90 days' pay per affected employee.

If you are part of a large scale redundancy and the employer has not engaged in genuine collective consultation, raise the question early with the employee representative, the recognised trade union, or directly with the employer in writing. Acas (the Advisory, Conciliation and Arbitration Service) offers free early conciliation through its helpline on 0300 123 1100.

Pension considerations

Redundancy is a trigger event for several pension decisions. Auto enrolment contributions stop on the leaving date. If you are over 55 (rising to 57 in 2028) you may have access to your defined contribution pension under the pension freedoms regime, but withdrawing tax efficiently requires care, particularly around the Money Purchase Annual Allowance which restricts future contributions to 10,000 a year once any taxable pension income is drawn. Pension Wise (offered by MoneyHelper) provides free guidance.

If the redundancy package includes an employer contribution to your pension, this often falls outside the 30,000 tax free cap and is therefore an efficient way to receive part of the settlement. The interaction with the annual allowance, the lifetime position, and any salary sacrifice arrangement should be checked before agreeing to the structure of the package.

Frequently asked questions

How much statutory redundancy pay am I entitled to?

Statutory redundancy pay depends on age, length of service and weekly pay. It is half a week's pay per year of service under age 22, one week's pay per year from 22 to 40, and one and a half weeks' pay per year at 41 and above. Weekly pay is capped at 700 from April 2025, and the calculation runs up to a maximum of 20 years. The statutory ceiling is 21,000. Many employers offer enhanced terms in the contract or staff handbook.

Is redundancy pay taxed?

The first 30,000 of genuine redundancy pay is exempt from income tax and National Insurance. Any amount above 30,000 is taxed as employment income in the year of payment and is subject to employer Class 1A National Insurance. Payments in lieu of notice and accrued holiday pay are fully taxable from the first pound, separately from the 30,000 exemption.

How long after redundancy will Universal Credit start paying?

The standard processing time for a new Universal Credit claim is approximately five weeks from application to first payment. The Department for Work and Pensions offers an advance payment that is repaid from future UC over up to 24 months. The advance is intended to bridge the wait and is available to most claimants.

Does my redundancy payment affect my Universal Credit?

Universal Credit is means tested on savings as well as income. Savings between 6,000 and 16,000 reduce UC at 4.35 per month per 250 of capital above 6,000. Savings above 16,000 cancel UC entitlement entirely. A large redundancy settlement can therefore reduce or stop UC. New style Jobseeker's Allowance (the contribution based benefit) is not means tested on savings and pays up to 92.05 a week for up to 26 weeks.

What is collective consultation and when does it apply?

Where an employer proposes to make 20 or more employees redundant within 90 days at one establishment, the Trade Union and Labour Relations (Consolidation) Act 1992 section 188 requires a minimum collective consultation period: 30 days for 20 to 99 redundancies, 45 days for 100 or more. Failure to consult properly can give rise to a protective award of up to 90 days' pay per affected employee through an Employment Tribunal claim.