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Notice Pay: What It Covers
Notice pay is the money you receive when your employer ends your contract and you are entitled to a notice period. It is designed to cover the time between being told you are leaving and your final day at work.
In the UK, notice pay is usually based on your normal pay and how much notice you are legally or contractually owed. If your employer does not want you to work your notice, they may pay you in lieu of notice instead.
This payment is not about losing your job because the role no longer exists. Instead, it is about making sure you are paid for the notice period you should have received.
Redundancy Pay: What It Is
Redundancy pay is a separate payment made when your job is ending because the employer no longer needs your role. This might happen because of business closure, reduced work, or a restructure.
You may only qualify for statutory redundancy pay if you have at least two years of continuous service. Some employers also offer enhanced redundancy packages, which can be more generous than the legal minimum.
Redundancy pay is compensation for losing your job through no fault of your own. It is not the same as being paid for the notice period before your employment ends.
Main Difference Between Notice Pay and Redundancy Pay
The key difference is what each payment is for. Notice pay replaces the wages you would have earned during your notice period, while redundancy pay compensates you for the loss of your job.
Notice pay is linked to the end of employment itself. Redundancy pay is linked to the reason for ending employment, specifically because the role is no longer needed.
You can sometimes receive both payments at the same time. For example, if you are made redundant, your employer may owe you redundancy pay as well as payment for your notice period.
How They Work Together in Practice
If you are made redundant, your employer should usually give you notice or pay in lieu of notice. On top of that, if you qualify, they should also pay redundancy pay.
Your final payment may also include any outstanding holiday pay, bonus entitlement, or unpaid wages. These are separate from both notice pay and redundancy pay.
It is important to check your employment contract and payslip carefully. The exact amount you receive can depend on your length of service, salary, and whether your employer offers enhanced terms.
Getting the Right Entitlement
Under UK law, your entitlement depends on your circumstances and the type of dismissal. If you are unsure, ask your employer for a written breakdown of your final pay.
If you think you have not been paid correctly, you can raise the issue with your employer or seek advice from ACAS, Citizens Advice, or an employment solicitor. Acting quickly can help you protect your rights.
Frequently Asked Questions
Notice pay is pay you receive for the notice period when employment ends. Redundancy pay is compensation for losing your job because the role is no longer needed. In the UK, they are separate entitlements and you may be entitled to one or both depending on your circumstances.
Most employees are entitled to notice pay if their contract or the law gives them notice. Statutory redundancy pay is usually available to employees with at least 2 years' continuous service who are dismissed because of redundancy and who meet the legal criteria.
Notice pay is usually based on your normal pay for the notice period you should have received. This may include salary, and in some cases regular contractual payments such as commission or allowances, depending on your contract and how pay is normally structured.
Statutory redundancy pay in the UK is based on age, length of service, and weekly pay, subject to the statutory weekly pay cap. Some employers also offer enhanced contractual redundancy payments, which can be more generous than the statutory minimum.
Yes, if you are dismissed by reason of redundancy you may receive both notice pay and redundancy pay. Notice pay covers the notice period, while redundancy pay compensates for the job loss itself.
Yes, an employer may pay payment in lieu of notice, often called PILON, if your contract allows it or if they choose to do so. This means you receive money instead of working the notice period.
If you are not paid the correct notice pay or redundancy pay, you may be able to raise a grievance, contact ACAS, or make a tribunal claim. Time limits can apply, so it is important to act promptly.
Notice pay is generally treated as taxable income and subject to National Insurance if it is pay for employment or payment in lieu of notice. The exact tax treatment can depend on how the payment is made and structured.
Statutory redundancy pay is usually tax-free up to the legal threshold, unlike normal earnings. However, any amount above the tax-free limit or certain other payments may be taxable.
The statutory minimum notice period depends on your length of service: at least one week after one month of service, two weeks after two years, and then one additional week for each year up to a maximum of 12 weeks. Your contract may give you longer notice.
Usually, working your notice does not remove your entitlement to redundancy pay if the redundancy dismissal is genuine. It may affect when you leave and whether you receive garden leave or remain on payroll during the notice period.
Garden leave normally means you stay employed and continue to receive pay during the notice period without working. It usually affects notice arrangements, but it does not normally remove redundancy pay if you are otherwise entitled to it.
If you are dismissed for gross misconduct, you may lose entitlement to notice pay because the employer can terminate without notice in serious cases. Redundancy pay would not usually apply because the dismissal is not for redundancy.
Continuous service is important for statutory redundancy pay and can also affect contractual rights and notice entitlements. For statutory redundancy pay, the key threshold is generally 2 years of continuous service.
Yes, part-time employees can usually be entitled to notice pay and may also qualify for redundancy pay if they meet the service and redundancy criteria. Part-time status should not reduce statutory rights simply because the role is part-time.
Fixed-term employees may be entitled to notice pay if the contract ends early or if notice is required. They may also qualify for redundancy pay if the contract ends because the employer no longer needs the work and the legal redundancy conditions are met.
Statutory rights are the minimum rights provided by law, while contractual rights come from your employment contract or employer policy. An employer can offer better notice or redundancy terms contractually, but not less than the statutory minimums.
If a redundancy dismissal is not genuine or the process is unfair, you may have an unfair dismissal claim in addition to claims about notice or redundancy pay. The fairness of the dismissal and the payment entitlements are related but separate issues.
Yes, these payments can be included in a settlement agreement, often with other amounts such as compensation or holiday pay. A settlement agreement can confirm what will be paid and can resolve disputes about entitlement.
Check your contract, payslips, redundancy letter, and the dates of your employment and notice. If the figures still look wrong, raise the issue with your employer, contact ACAS, or seek legal advice if needed.
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