UK employer guide
What costs are involved in a redundancy?
A redundancy can carry several different costs, not just the compensation payment. Planning ahead helps you avoid surprises during the process.
In short
Common costs include notice pay, redundancy pay, accrued holiday, pension during notice and any support or settlement costs. The total can vary a lot depending on the contract and the legal process.
Notice pay
If someone is entitled to notice, you often need to budget for salary during that period even if the role is ending. That can be one of the biggest costs in a redundancy plan.
Redundancy pay
Statutory or enhanced redundancy pay may also apply, depending on the person's service, contract and employer policy. Some packages go beyond the legal minimum.
Other costs
Accrued holiday, pension during notice, legal advice, settlement terms, HR time and outplacement support can all add to the final bill.
Why budgeting matters
Even when a redundancy is necessary, it is helpful to know the likely cash impact before making decisions about staffing, restructuring or replacement hiring.
Use the redundancy cost calculator for a planning estimate. GOV.UK's redundancy rights guidance and redundancy pay information explain the main statutory rules.