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Redundancy payments fall into two categories: statutory payments and non-statutory payments.

Statutory redundancy is the amount which must be paid by the employer to the employee under employment law and will be a fixed amount for each year of service. See the Statutory redundancy pay guidance note).

An employee may also be entitled to a redundancy payment in accordance with the express terms of the contract of employment or they may be able to claim an implied contractual right where the payment of a specific amount on redundancy by an employer has become contractual through custom and practice. An employer may also offer a non-statutory redundancy payment where no scheme is in place. An employer may have refer to this as ‘enhanced redundancy’ and it is common to have an enhanced redundancy policy in place.

Where an employer’s redundancy policy is stated to be discretionary, the contractual position will need to be carefully checked. It is not uncommon for employers to require employees to enter into settlement agreements (whereby,