Redundancy Final Pay: Separate Notice Pay, Holiday Pay and Redundancy Pay
“Your redundancy package is £12,000” is not much help if nobody explains what the figure contains. Notice pay, holiday pay and redundancy pay answer different questions. Keeping them separate makes it easier for an employee to understand the offer and for an employer to check the calculation.
Official guidance checked on 9 October 2026. This guide covers Great Britain; Northern Ireland has separate employment rules. It is general information, not advice on an individual termination.
Build an itemised statement
| Component | Question to check |
|---|---|
| Outstanding wages | What work remains unpaid up to the leaving date? |
| Notice pay or PILON | What notice is due, and will it be worked or paid in lieu? |
| Unused holiday | What statutory entitlement has accrued and remains untaken? |
| Redundancy pay | Does the employee qualify, and what statutory or contractual amount applies? |
| Other payments or deductions | What contractual basis, calculation and tax treatment apply? |
Acas recommends explaining final-pay calculations so the person leaving can see what each payment or deduction represents. The usual payroll date can still apply; agree the payment timetable clearly.
Notice is a separate entitlement
The statutory notice rules provide one week’s notice after one month and before two years’ service, then one week per full year between two and twelve years, up to twelve weeks. Check the contract for a longer entitlement. Give notice after completing the consultation and selection process.
PILON means paying instead of requiring the employee to work the notice period. Check the contract or agreement and document the arrangement. If the employee is off sick or on family leave during notice, the calculation can depend on how contractual notice compares with statutory notice. Use Acas’s notice-pay guidance and obtain advice for variable pay or uncertain cases.
Holiday pay is not redundancy pay
Acas confirms untaken accrued statutory holiday must be paid when employment ends. Check the leave year, working pattern, recorded leave and the applicable pay calculation. Additional contractual holiday may have separate terms.
If someone has taken more leave than accrued, do not automatically deduct it. Acas says a deduction needs prior written agreement. Taking holiday during notice also requires attention to notice requirements and any relevant agreement.
Check eligibility and dates separately
Statutory redundancy pay normally requires two years’ continuous employment. That is a different test from qualifying service for an ordinary unfair dismissal claim. Check the unfair-dismissal rules separately; changes to that qualifying period do not themselves change redundancy-pay eligibility.
Our redundancy calculator can support an initial estimate. Verify the relevant date, continuous service, weekly-pay limit and any contractual enhancement before relying on a figure. PILON can affect the relevant date for statutory redundancy calculations; check the official rules rather than assuming the last day worked always settles it.
Do not treat the entire package as tax-free
GOV.UK distinguishes the tax treatment of redundancy compensation from wages, holiday pay and notice-related payments. Wages, holiday pay and PILON are generally taxable and subject to National Insurance. The £30,000 exemption is not a blanket exemption for everything in the final payslip.
Enhanced termination payments can require post-employment notice pay calculations. Ask payroll or a qualified adviser to check these rather than applying one tax label to the headline total.
A tool can organise the breakdown
Our Excel-based severance package calculator is described as separating statutory redundancy pay, unused holiday reimbursement and PILON. That is useful for organising the component figures. It does not establish eligibility or guarantee a lawful dismissal.
The product page has a 2026 heading but also refers to 2025/2026 assumptions and a 2025 demonstration. Check the actual workbook’s rates and instructions before using it for a current departure; the legacy URL year does not prove the edition or applicable limits.
FAQs
Can one total be enough?
Give an itemised explanation so the employee can understand the components, deductions and expected payment date.
Is notice pay included within statutory redundancy pay?
They are separate entitlements. Show them separately.
Does a calculator make the termination fair?
No. Calculation and a fair redundancy process are separate matters. See our consultation guide for the earlier process.
Optional background reading
Elizabeth Aylott’s Employment Law: A Practical Introduction (third edition, 2022) provides background context. It is not evidence of later reforms; use current official sources for the rules relevant to your case.
| Photo | Product | Price | Buy |
|---|---|---|---|
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Employment Law: A Practical Introduction: 21 (HR Fundamentals series, 21) | £20.99 |
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