NHS Redundancy Pay Explained: Rules and Your Rights

Last updated: 28 September 2026 · Figures verified against the NHS Employers 2026/27 pay circular.

By the NHS Bands Pay editorial team

Who is entitled to it

The entitlement comes from Section 16 of the Agenda for Change terms and conditions, which applies to all AfC-contract staff in England. (Scotland applies the same framework through its own circulars; Wales and Northern Ireland have equivalent provisions.) Three conditions must all be met:

1. You have at least 2 years' continuous NHS service ending with the date your employment terminates.
2. You are dismissed by reason of redundancy — your role (or the need for employees to do that work) has ceased or diminished.
3. You have not resigned voluntarily outside an agreed redundancy scheme, and none of the forfeiture conditions apply.

The payment is one month's pay per complete year of reckonable service, capped at 24 months, prorated for part-time hours. There is no age weighting — unlike the statutory formula, where your age determines the multiplier. The contractual terms replace the statutory minimum: you do not get both. A note on salary limits: some secondary sources cite a £23,000 floor and an £80,000 ceiling on the FTE salary used, but these figures do not appear in the published Section 16 terms we were able to verify, so they are not applied here — confirm the current position with payroll.

For most AfC staff the contractual payment is several times the statutory minimum — which is why the qualifying conditions and forfeiture rules matter so much. Worked examples using 2026/27 England rates (full-time, no salary cap applied):

If the unconfirmed £80,000 ceiling cited by some secondary sources were applied, the Band 8d and Band 9 rows would be lower — our redundancy pay calculator uses the confirmed formula (one month's pay per complete year, 24-month cap) and flags the ceiling question explicitly.

Reckonable service: what counts

"Reckonable service" is the service that counts toward the calculation. In broad terms:

• Continuous NHS service with NHS employers counts — including moves between trusts, which preserve continuity. Only complete years count: 9 years and 11 months gives 9 months' pay.
• Service before a break may be lost if continuity was broken (for example, resigning and returning after a gap), though some NHS returner arrangements preserve it — check your continuity date on ESR.
• Part-time service counts the same for years of service, but the month's pay is based on actual pro-rata salary, so the payment is proportionally smaller.
• Maternity, paternity, adoption and sick leave do not break continuity — the service still accrues.

The single most useful thing you can do early is ask HR for your reckonable service date from ESR and confirm the figure in writing before any numbers are agreed.

Consultation: your rights

Redundancy is not just a payment formula — it is a legal process, and the process has minimum standards:

• Individual consultation must happen in every case: your employer must discuss with you why your role is at risk, consider alternatives, and give you a chance to make representations before a final decision.
• Collective consultation applies where 20 or more redundancies are proposed at one establishment within 90 days: at least 30 days before the first dismissal takes effect (20–99 redundancies) or 45 days (100 or more), with recognised unions or elected representatives.
• Ways to avoid redundancies must genuinely be considered — redeployment, retraining, reduced hours, voluntary schemes — not merely announced.
• Fair selection criteria must be applied where a pool of staff is at risk; discriminatory criteria (including indirect discrimination) are unlawful.

A flawed process can make a dismissal unfair even where the redundancy itself was genuine — and an unfair dismissal claim is separate from the redundancy payment. Employment tribunal time limits are short (normally three months less one day from termination, with early conciliation through Acas), so take union advice promptly if anything looks wrong.

Suitable alternative employment

Your employer must take reasonable steps to find you suitable alternative employment — and this is where redundancy payments are most commonly lost:

• An alternative post must be suitable in terms of status, pay, location, working arrangements and your skills. A Band 6 nurse offered a Band 3 HCA post an hour's commute away could reasonably argue it is not suitable; a same-band post on the next ward over is harder to refuse.
• If you unreasonably refuse a suitable alternative, you lose the redundancy payment. "Unreasonable" is judged from your perspective, but refusing without good reason is dangerous.
• You are entitled to a four-week trial period in the alternative post. If the post proves unsuitable during the trial, your redundancy payment is preserved.
• Staff on maternity leave have first refusal of suitable alternative vacancies — a protected right worth knowing if redundancy coincides with maternity leave (see our maternity pay guide).

Notice and forfeiture

You are entitled to your contractual or statutory notice period, whichever is longer — and the interaction between notice and the redundancy payment contains the single most costly trap:

• Leaving before notice expires without an agreed earlier release date forfeits the redundancy payment. This has been tested at tribunal level under the Agenda for Change terms. If you have a new job lined up and want to start early, get the earlier release agreed in writing before you hand in notice.
• Notice pay itself is contractual — check whether you are working notice or receiving payment in lieu (PILON), since PILON is taxed differently from the redundancy payment itself.
• Employees with 2+ years' service are entitled to reasonable paid time off during notice to look for work or arrange training.
• Holiday entitlement accrued but untaken is paid out on termination; our annual leave guide explains how the leave year works on exit.

Voluntary vs compulsory redundancy

The contractual formula is the same whether you volunteer or are selected — but the routes differ:

• Voluntary schemes (often called MARS — mutually agreed resignation schemes — or VR/VS) are sometimes offered with enhanced terms above Section 16. Read the scheme document carefully: enhanced terms can have different tax treatment and different forfeiture conditions.
• Volunteering outside a scheme — simply resigning during a redundancy exercise — normally means no redundancy payment at all.
• Compulsory selection follows the consultation and selection process above; the payment is then automatic if the qualifying conditions are met.

Never resign to "beat" a redundancy exercise without union advice: a voluntary resignation is not a redundancy dismissal, and the payment depends on the dismissal being by reason of redundancy.

Fixed-term, maternity, agency and other situations

• Fixed-term contracts: employees on fixed-term contracts with 2+ years' continuous service have redundancy rights, and the expiry of a fixed-term contract can count as a dismissal by reason of redundancy — including the non-renewal of successive fixed terms.
• Maternity/adoption/shared parental leave: redundancy during leave is lawful only if the redundancy is genuine and the selection is not connected with the leave; staff on maternity leave get priority for suitable alternative vacancies.
• Agency workers: workers supplied by agencies are not employees of the trust and do not qualify for contractual redundancy pay from it.
• Over minimum pension age: pension scheme members can opt for early retirement with no actuarial reduction instead of the redundancy payment, with the employer meeting the cost. This is often worth more than the lump sum for long-serving staff — take independent financial advice.

Pension and tax consequences

Your accrued pension benefits are protected on redundancy: leaving the NHS ends future accrual but your deferred benefits remain in the scheme, uprated until you draw them. The first £30,000 of a genuine redundancy payment is generally free of income tax (and no NICs are due); amounts above that are taxed as employment income. Payments in lieu of notice and holiday pay are taxed normally. Tax rules change — confirm the treatment of your specific payment with payroll or a qualified adviser before relying on it.

If you are re-employed in the NHS after redundancy, check how the break affects continuity for future entitlements — and if you move to a new AfC post, see how starting salaries recognise prior NHS service.

Your redundancy checklist

1. Get your reckonable service date from ESR/HR in writing.
2. Confirm the salary figure being used (including HCAS) — and ask payroll whether any salary floor or ceiling applies to the calculation.
3. Join or activate your union — redundancy is what unions exist for.
4. Engage with consultation; put representations in writing.
5. Consider suitable alternatives seriously; use the four-week trial period.
6. Never leave before notice expires without an agreed earlier release in writing.
7. If over minimum pension age, compare the early-retirement option with the lump sum — take independent financial advice.
8. Check the tax treatment of each element of your final package.
9. Diary tribunal time limits (three months less one day) in case the process was unfair.

Frequently asked questions

Who is entitled to NHS redundancy pay?

Agenda for Change staff with at least 2 years' continuous NHS service whose employment ends by reason of redundancy. The contractual payment is 1 month's pay per complete year of reckonable service, up to 24 months.

Can I lose my NHS redundancy payment?

Yes, in specific situations: leaving before your notice period expires without an agreed earlier release date forfeits the payment, and unreasonably refusing a suitable alternative post can too.

What is suitable alternative employment in NHS redundancy?

A post the employer offers as an alternative to redundancy that is suitable in terms of status, pay, location and working arrangements. You get a four-week trial period in the new post.

How long is the NHS redundancy consultation period?

Individual consultation must happen in every case. Where 20 or more redundancies are proposed within 90 days, collective consultation rules apply: at least 30 days before the first dismissal for 20–99 redundancies, and at least 45 days for 100 or more.

What happens to my NHS pension if I am made redundant?

Your accrued pension benefits are protected. If you are over the minimum pension age you can choose early retirement with no actuarial reduction instead of the redundancy payment; otherwise you take the payment and your deferred benefits remain in the scheme.

Is voluntary redundancy better than compulsory redundancy?

The contractual payment formula is the same for voluntary and compulsory redundancy. Voluntary schemes sometimes add enhanced terms, but leaving voluntarily in a compulsory exercise usually forfeits the payment — get union advice first.

Do agency and fixed-term NHS staff get redundancy pay?

Fixed-term employees with 2+ years' continuous service have redundancy rights; the expiry of a fixed-term contract can count as a dismissal by reason of redundancy. Agency workers engaged through agencies are not employees of the trust and do not qualify.

Sources and independence

Source: NHS Employers — Agenda for Change terms and conditions, Section 16 (redundancy).

Source: 3PB Barristers — contractual redundancy pay and the statutory cap (secondary commentary quoting AfC Section 16).

Source: UNISON — NHS pay proposals 2015 stewards' briefing (secondary source citing Section 16 floor and ceiling figures).

Source: Acas — redundancy guidance (consultation, notice, pay).

NHS Bands Pay is an independent information website. It is not affiliated with, endorsed by, or acting on behalf of the National Health Service or NHS Employers. This page is general information, not legal advice: redundancy disputes are fact-sensitive and tribunal time limits are short. Speak to your union representative or an employment adviser about your own situation.