Being made redundant is one of the most stressful experiences in working life. When your employer puts a settlement agreement on the table, you need to understand exactly what you are being offered and what you may be giving up by signing it.
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A redundancy settlement agreement is a legally binding contract between you and your employer that brings your employment to an end on agreed terms. In exchange for a financial package, you agree to waive your right to bring claims against your employer in the Employment Tribunal.
Redundancy settlement agreements are used in two main situations:
In both cases, the employer typically presents the settlement agreement at the outset of the process. If you sign, the redundancy process does not need to be completed. All claims are waived once all parties have signed.
Not sure whether your situation is redundancy or something else? Read our guide: Ending Employment in the UK: Redundancy, Dismissal and Settlement Agreements Explained.
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Your redundancy payment will typically include two elements:
Statutory redundancy pay is calculated based on your age, length of service and weekly pay, subject to the following rules:
A maximum of 20 years’ service counts toward the calculation.
From 6 April 2026, the weekly pay cap increased from £719 to £751 per week, meaning the maximum statutory redundancy payment is now £22,530.
For a step-by-step calculation guide, see: How Do I Calculate Redundancy Payments?
The first £30,000 of your redundancy payment is tax-free. Payments above that threshold are subject to income tax in the normal way.
In addition to statutory redundancy pay, you will typically be entitled to:
Employers often offer an enhanced payment above the statutory minimum, particularly in voluntary redundancy situations where they want to incentivise take-up or reward loyalty.
This enhanced element is where our solicitors can frequently negotiate an increase, particularly where there are procedural concerns about the redundancy process.
If you have questions or need guidance on where to start, you can arrange a free no-obligation telephone appointment with a settlement agreement lawyer. Simply call us, request a callback, or begin the process online.
The Employment Rights Act 2025 received Royal Assent on 18 December 2025 and introduced several major changes affecting redundancy processes and settlement agreements. Many reforms are being phased in throughout 2026 and 2027.
From April 2026, the maximum protective award for failures in collective redundancy consultation increased from 90 days’ pay to 180 days’ pay per affected employee. This significantly increases the potential financial exposure for employers who fail to follow proper consultation procedures.
The qualifying period for ordinary unfair dismissal claims is expected to reduce from two years to six months from January 2027. Once implemented, employees will gain protection much earlier in their employment, which may strengthen their position during redundancy and settlement negotiations.
The government continues to strengthen protections against workplace harassment and discrimination, including tighter restrictions on the use of confidentiality clauses in settlement agreements. Clauses attempting to prevent individuals from reporting unlawful conduct or seeking professional support are unlikely to be enforceable.
|
Statutory Pay Rates |
Previous Rate | Rate from 6 April 2026 |
|
Weekly pay cap (redundancy/basic award) |
£719 | £751 |
| Maximum statutory redundancy pay | £21,570 |
£22,530 |
| Maximum unfair dismissal compensatory award | £118,223 |
£123,543 |
| Maximum unfair dismissal basic award | £21,570 |
£22,530 |
If you believe your redundancy was procedurally or substantively unfair, you may have the right to bring an unfair dismissal claim in the Employment Tribunal. This could include situations where the selection process was flawed, consultation was inadequate, or the redundancy was not genuine.
Claims must ordinarily be issued within three months of the date your employment ended. Before issuing a claim, you are required to notify the Advisory, Conciliation and Arbitration Service (ACAS) and go through the early conciliation process.
Damages for unfair dismissal are based on your actual financial loss following termination. This includes lost salary, benefits and pension contributions, which are reduced by any amounts you earn (or could reasonably have earned) in new employment.
Critically, once you sign a settlement agreement, these rights are gone.
This is why it is essential to speak to a settlement agreement solicitor before signing. If your redundancy process was flawed, a specialist solicitor may be able to negotiate a significantly higher payment from your employer, without the need for Tribunal proceedings.
A redundancy settlement agreement is only legally binding if you have received independent legal advice from a qualified solicitor, barrister or certified trade union representative before signing. This is a statutory requirement under section 203 of the Employment Rights Act 1996.
This is not a formality. It exists to protect you. Your adviser must:
Your employer will ordinarily contribute toward your legal costs. Ask us about this when you get in touch.
Importantly, if you have concerns about the way your redundancy was handled, whether the process was genuine, whether selection was fair or whether the right procedure was followed, tell your solicitor. This information forms the basis of any negotiation for an improved offer.
Our specialist settlement agreement solicitors advise employees on redundancy settlement agreements every day. We will:
We offer a free initial consultation. Call us today or request a call back, and a member of our team will be in touch promptly.
Yes, you can negotiate a redundancy settlement agreement. An offer in a settlement agreement is not necessarily final. If the redundancy process was flawed or the initial offer is below what you would be entitled to through a tribunal, your solicitor can negotiate on your behalf.
There is no fixed legal deadline to sign a redundancy settlement agreement, but employers will typically set a reasonable timeframe. You should receive at least 10 calendar days to consider a settlement agreement, in line with ACAS guidance on good practice.
The first £30,000 of a redundancy payment is tax-free. Any amount above £30,000 is subject to income tax. Payments in lieu of notice (PILON) are always taxable.
You do not have to keep your redundancy confidential automatically, but most settlement agreements include a confidentiality clause. What you can and cannot discuss depends on the specific terms you sign.
Yes, you still need a solicitor if you have been offered voluntary redundancy. The requirement for independent legal advice applies regardless of whether the redundancy is compulsory or voluntary. This protects you and ensures the agreement is legally valid.
If you decline the settlement agreement, the redundancy process continues. You may ultimately be made redundant anyway through the formal process, in which case you would receive your statutory entitlements. Your decision to decline the agreement cannot itself be used against you.
Signing a settlement agreement does not prevent you from seeking new employment. References and what you can say to future employers are usually covered in the agreement itself.
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