Redundancy notice pay is the cost most employers work out last, after the decision is already made. It is often the bigger number. An employee with ten years of service is owed ten weeks of notice at full pay. That can outweigh their statutory redundancy payment. And unlike redundancy pay, notice is owed to every employee with a month's service or more, not only those past two years. 

This guide covers the notice you owe, what redundancy notice pay includes, and the three ways to handle the notice period: working it, paying in lieu, or garden leave. It also covers a sick pay rule that catches out employers with generous contracts. 

One boundary before we start. This article deals with notice. How the statutory redundancy payment itself is calculated is a separate subject, covered in our guide to statutory redundancy pay. For a quick figure on that side, our free redundancy calculator produces it in under a minute. 

When does the redundancy notice period start? 

Notice comes at the end of the redundancy process, not the beginning. GOV.UK is explicit: you give notice and agree a leaving date once consultation has finished. Serving notice while consultation is still running suggests the decision was made before the consultation. That is one of the fastest routes to an unfair dismissal finding. 

Telling someone their role is at risk is not notice. Neither is the consultation invitation, nor a conversation about timelines. Notice is a formal step: a written statement that employment will end, with the leaving date in it. The notice period runs from that point, not from the day the redundancy was first mentioned. 

Two consultation rules sit upstream of this. For individual cases, a fair redundancy consultation process has to be genuinely complete before notice is served. Collective rules apply where you are making 20 or more employees redundant within any 90-day period at a single establishment. The Employment Rights Act 2025 adds a second trigger counting redundancies across the whole business rather than one site, expected in 2027 once regulations are made. The collective rules add fixed minimum periods before the first dismissal can take effect. Our guide to collective redundancy and the 45-day rule covers those timescales. 

One more point employers miss. Once notice is served with a leaving date, you cannot withdraw it just because circumstances change. ACAS confirms the employee has to agree to any withdrawal. Serve notice when you are certain, not before. 

What the notice letter needs to say 

The notice letter is short, and every line in it earns its place. It states that employment is ending by reason of redundancy. It gives the notice period and the exact leaving date. It confirms how the notice period will be handled: worked, paid in lieu, or garden leave. It sets out what happens to pay, pension and benefits through the period, and how any unused holiday will be dealt with. ACAS encourages putting these points in writing, and for good reason. Most redundancy notice period pay disputes start with a vague letter, not a wrong rate. A letter that pins down the date and the money leaves nothing to argue about later. 

How long is a redundancy notice period? 

The statutory minimum depends on service, and GOV.UK sets out the bands: 

1. One month to two years of service: at least one week. 
2. Two to twelve years: one week for every full year worked. 
3. Twelve years or more: twelve weeks. The statutory figure stops there. 

That is the floor, not the answer. Check the contract before you set any leaving date. If the contract gives longer notice than the statutory minimum, the contractual period applies. A contract promising three months of notice means three months, even for someone with two years of service. Most redundancy budgets that go wrong go wrong here: the spreadsheet used statutory weeks and the contracts said something longer. 

Redundancy notice pay: what the employee is owed 

Through a worked notice period the contract carries on as normal. Full pay continues. Pension contributions continue. Contractual benefits, a car allowance or private health cover, continue too. For staff with variable earnings, GOV.UK bases notice pay on their average weekly earnings over the twelve weeks before the notice period starts. 

The law then adds a layer of protection most employers have never read. It sits in section 88 of the Employment Rights Act 1996. An employee serving statutory notice still gets full pay when off sick, on holiday, or on maternity or other family leave. The same applies when they are ready to work but no work is provided. An employee who goes off sick during their notice period does not simply drop to sick pay. In the protected cases, notice pay holds at a full week's pay. 

If ill health is the reason the redundancy conversation started at all, the situation needs different handling. Our guide to ill health redundancy deals with that route and its risks. 

The sick pay trap in generous contracts 

Here is the rule that surprises practitioners, let alone owners. The full-pay protection above does not apply to every contract. Section 87(4) switches it off where the notice the contract requires from the employer is at least one week longer than the statutory minimum. 

Work through what that means. An employee with two years of service has a statutory entitlement of two weeks. Their contract gives three months. Because the contractual notice beats the statutory figure by a week or more, the statutory protection disappears. If they are off sick through their notice period, they are owed whatever the contract says, which may be statutory sick pay alone. Meanwhile a colleague on bare statutory notice, off sick for the same weeks, must get full pay. 

So the generous contract can produce the smaller notice-period payment. Neither outcome is wrong in law. The mistake is assuming one rule covers both employees, paying them the same, and creating either an overpayment or a shortfall with a claim attached. When notice and sickness collide, check which side of section 87(4) each contract sits on before running payroll. This is an educational summary, not advice on any individual case. 

Holiday during the notice period 

The contract runs to the leaving date, so holiday keeps accruing to the leaving date. An employee on twelve weeks of notice builds up nearly a quarter of a year's entitlement during it. Two questions need settling early. Will they take remaining holiday during the notice period, or be paid for what is left when they go? ACAS includes unused holiday in the list of points to confirm in writing when notice is served, and settling it on day one avoids a dispute in the final week. And if the employee is away on holiday during statutory notice, section 88 keeps that time at full pay, the same protection that applies to sickness absence. 

Working notice, PILON or garden leave: pick one on purpose 

Every redundancy notice period is handled in one of three ways. Each has a different cost profile and a different risk. Choosing by default is how employers end up with the wrong one. 

Working the notice period 

The default position. The employee works to the leaving date and is paid as normal. It is the cheapest option and keeps handovers orderly. The common question runs the other way: do they have to work their redundancy notice period? Yes, unless you agree otherwise. An employee who simply stops coming in is in breach, though chasing that is rarely worth it. 

An employee who finds a new job mid-notice has a formal route out. ACAS explains the counter-notice rules: they give their own written notice within the final part of the notice period, and their redundancy payment can survive the early exit. As the employer you can object, but agreed early releases are usually the cleaner path. Put any agreed change of leaving date in writing, because the date drives their final pay. 

Payment in lieu of notice 

A PILON ends employment immediately and pays out what the notice period would have carried. GOV.UK confirms the payment covers the basic pay the employee would have earned. Pension and other contractual contributions are included where the contract requires them. Tax and National Insurance are deducted. 

Whether your contract contains a PILON clause decides how clean this option is, and the tax treatment has traps of its own. Both are covered properly in our guide to PILON payments. The short version for redundancy planning: a PILON buys certainty and an immediate exit, and it costs the full notice value up front with nothing worked in return. 

Garden leave 

On garden leave, employment continues to the original leaving date but the employee stays at home. Full pay and benefits run on. Because they remain employed, their duties to you remain live, and they cannot start for a competitor during the period. That makes garden leave the usual choice where the concern is access: to customers, pricing, pipeline or systems. It costs the same as worked notice, with none of the output. Check the contract supports it before relying on it, because sending someone home without the right to do so can itself be a breach. 

Choosing between the three 

Three questions settle most cases. First, is there anything useful for the employee to do? If handover matters, worked notice wins. Second, is continued access a risk? If yes, garden leave beats PILON, because a PILON ends the employment relationship and its obligations early. Third, does cash flow matter more than certainty? A PILON front-loads the whole cost into one payslip. Worked notice spreads it. 

Run the maths on a real profile before deciding. Take an employee with eight full years of service and no enhanced contractual notice. The statutory band gives eight weeks. Worked notice costs eight weeks of pay with eight weeks of output. Garden leave costs the same eight weeks with no output but full protection of customers and systems. A PILON costs eight weeks in a single payment, with the exit today. Same entitlement, three different shapes of cost. The wrong habit is defaulting to the same option every time. The notice period is a decision, and the profile of the employee should drive it. 

Paid time off to look for work 

An entitlement that surfaces in almost every redundancy notice period, and almost no SME budgets for it. An employee under notice of redundancy, with two or more years of service, has a legal right during the notice period. They can take reasonable paid time off in working hours to look for a new job or arrange training, under section 52 of the Employment Rights Act 1996. 

The exposure is capped. Under section 53, your liability for that paid time off is limited to 40% of one week's pay across the whole notice period. Two practical points follow. Agree the pattern early, in the first week of notice, so interviews do not land as daily surprises. And do not refuse unreasonably: section 53 makes you liable for the same amount whether the time off was taken or wrongly refused. Saying no does not save the money. 

Five ways notice goes wrong 

1. Notice served before consultation finished. It reads as a decision made in advance, and tribunals treat it that way. Finish consulting, then serve. 
2. Employment ended on the spot with nothing in place. No worked notice, no PILON payment, no agreement. That is a straightforward breach of contract, with the notice money owed anyway. 
3. Statutory weeks used where the contract gives more. The leaving date, the budget and the final pay all come out wrong, and correcting a served notice needs the employee's agreement. 
4. Sick employees dropped to SSP automatically. Whether notice pay holds at full pay depends on the section 87(4) test above. Assume nothing until the contract has been checked. 
5. Notice pay and redundancy pay merged into one budget line. They behave differently: different qualifying service, different caps, different tax treatment. Cost them separately and the surprises stop. 

Know where you stand before the next one 

Redundancy has a way of testing paperwork written years earlier. The notice clause, the PILON clause, the sick pay terms: none of them were drafted with this employee in mind. The middle of a redundancy is the worst moment to discover what they say. 

The free HR Health Check takes under a minute and lets you know where your HR is solid and where it is exposed, contracts and redundancy paperwork included. Start it at /HR-Health-Check.