What to do if you are made redundant

We look at what to do if you are made redundant as online furniture retailer Made.com goes bust, with around 500 people expected to lose their jobs

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With the UK facing it's longest recession since records began, according to the Bank of England, it's important to know what to do if you are made redundant should you lose your job. Being suddenly made redundant is scary – you might be worried about how to pay your bills and how to pay off debt (opens in new tab) while searching for another job.

The recession and rising costs are putting pressure on businesses to cut staff, so it makes sense to be prepared if you think your job could be at risk. For families wondering will there be a recession (opens in new tab), it's sensible to look at how you might be able to recession-proof your finances.

Head of personal finance at AJ Bell, Laura Suter (opens in new tab) says: “It’s likely that next year will bring a wave of redundancies across the UK as companies struggle to make profits and look to cut their overheads.” It might sound like a gloomy outlook but don’t panic – if your employer wants to make you redundant there are lots of rules it needs to follow and most people will qualify for redundancy pay.

 What to do if you are made redundant 

Firstly, let's look at the really practical steps you should take if you are made redundant.  Your employer should give you the following on or before your last day at work: 

  • your P45  (it’s important you hang on to this as you will need to give it to your new employer - it shows how much  tax you have paid in the current tax year)
  • details of your workplace pension 
  • job references  
  • a letter stating the date of your redundancy 
  • your redundancy pay (paid into the same bank account as your wages) 
  • a written statement showing how your redundancy pay was calculated.

You’ll normally need to return company property, such as computers and other equipment, before your last day.

You should take stock of your finances after you’ve been made redundant. Do you have income protection insurance? This will pay out if you are made redundant. Have you got savings you can use to live on until you find another job?

If redundancy leaves you struggling with debt payments, take professional advice from a debt charity such as StepChange or Citizens Advice.

On the other hand, if you receive a large redundancy payment and don’t immediately need it to live on, consult an independent financial advisor (IFA) about the best way to invest it.

What does it mean to be made redundant?

Redundancy is when you’re dismissed from your job due to your role no longer being needed. Sometimes individuals are made redundant but often its groups of people. Redundancy is often the result of a restructuring or cost-cutting programme, but it can also happen if a firm goes bust. Your employer is not allowed to make you redundant then hire someone else to do your job - it is the role that is made redundant.

Head of employment at Spencers Solicitors, Danielle Wright (opens in new tab), says: “An employer can make an employee redundant if the organisation or part of it is closing, there is a need to change types or a number of roles in a certain department or if they are changing location.

“An employer should always look for alternatives before making an employee redundant. For example, they should consider changing working hours, offering voluntary redundancy or filling vacant roles in other departments or locations.”

One thing you could do to ensure the best outcome should you be made redundant is join a union. A union might be able to negotiate a better redundancy package on your behalf or provide free advice about your rights.

What are your rights if you are made redundant?

If you find that you might be made redundant, it's important that you know what your rights are. 

Firstly, you should be given notice if you’re going to be made redundant. Beverley Sunderland (opens in new tab), managing director at Crossland Employment Solicitors, says: “Before an employer makes redundancies it must consult with affected employees for a reasonable period – the minimum period is considered to be two weeks but if 20 or more employees at one ‘establishment’ are potentially redundant then this must be a minimum of 30 days, 45 days if 100 or more employees. 

“The employer is consulting about the proposals to make redundancies, to get feedback before making a final decision. Once they decide to go ahead with the plans then they must consult with the employees about how this affects them.” 

This table shows the minimum amount of notice you should be given. 

Swipe to scroll horizontally
Length of serviceNotice period
12 years or more12 weeks
Two -12 yearsOne week for each year of service
One month to two yearsOne week

Lynne Ingram (opens in new tab), employment director at  legal firm Freeths, says: “All employees are entitled to their contractual notice. The employee may be required to work their notice although most employers would waive this requirement. If you are working your notice, you are entitled to reasonable time off to look for new employment and attend interviews.”

If your employer doesn’t want you to work your notice period, they might “pay in lieu of notice”. Other firms may put you on “gardening leave” which means you won’t be required to work but, technically, you’re still an employee.

If you are made redundant, you’ll also be entitled to: 

  •  The chance to raise objections and suggest alternatives to redundancy 
  •  Legal representation (i.e. from a union or lawyer) 
  •  Suitable alternative employment within the company if possible 
  •  Time off to look for work 
  •  The right to appeal your redundancy or go to a tribunal 

“There is a myth that those who are pregnant or on maternity leave cannot be made redundant but this is not true,” says solicitor Beverley Sunderland, “To favour a pregnant woman by not selecting her or by applying favourable scores in the selection process, can lead to successful sex discrimination claims by men who are made redundant as a result.”  

How much redundancy pay could you get?

You’ll either get ‘statutory’ redundancy pay (the minimum the law says you’re entitled to) or ‘contractual’ redundancy pay (as set out in your contract). 

Statutory redundancy pay is based on your gross (before tax) earnings, your age and how long you’ve worked for your employer. This table shows how much you’ll get.

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AgeRedundancy pay for each full year of employment
Up to 22Half a week’s pay
22-40One week’s pay
41 upwardsA week-and-a-half’s pay

However, when calculating redundancy pay, your weekly pay is capped at £571 and the maximum statutory redundancy pay you can get is £17,130.

You can use the government’s redundancy pay calculator (opens in new tab) to figure out how much you could be entitled to. You should also receive any holiday pay and any outstanding bonuses, commission or expenses.

Contractual redundancy pay must be at least as much as the statutory minimum, but it can be a lot more. If your employer asks for volunteers for redundancy, you can often negotiate a package. 

If you have been made redundant and your employer is now insolvent, you’ll need to claim your redundancy payment from the Insolvency Service.

Can I claim benefits if I have been made redundant? 

You may be able to claim New Style Jobseeker’s Allowance, New Style Employment and Support Allowance or Universal Credit if you’ve been made redundant. It can take several weeks to process a benefits claim, so it’s a good idea to get the process underway as soon as possible. 

However, any redundancy payment will be treated as ‘capital’ when assessing your claim. If you (and your partner, if applicable) have capital of more than £16,000 you won’t be able to get Universal Credit. 

If you have a mortgage, and your redundancy means you can claim benefits, you might be eligible for a Support for a Mortgage Interest (SMI) loan to help pay the interest on your mortgage. 

You can use the government’s benefits calculator (opens in new tab) to find out what benefits you might be entitled to. 

 Useful resources if you have been made redundant 

Laura Suter

Laura has been at AJ Bell for four years, and was a personal finance journalist before that. She’s recently become a mum, so saving for kids is a topic particularly close to her heart.