Redundancy Payment Explained

There are two separate things called redundancy pay, and which one applies to you depends on whether you were in service at the time.

If you were made redundant from the armed forces, or directed to retire early, you're covered by the Armed Forces Redundancy Scheme. Service personnel aren't employees for statutory redundancy purposes, so the civilian rules don't apply. AFRS pays a tax-free lump sum as compensation for lost career expectation, and it's paid on top of any terminal benefits you're due — Resettlement Grant, EDP income, EDP lump sum, pension and pension lump sum. Which version of AFRS applies depends on your pension scheme.

Statutory redundancy is the civilian right, and it matters in a later civilian job. It needs two years' continuous employment with the same employer, and what you get depends on your age, length of service and weekly pay, with a cap on the weekly figure.

Both are tax-free up to a limit, which is worth knowing when you're working out what actually lands in your account.

Who is eligible?

For the Armed Forces Redundancy Scheme, it follows your pension scheme and your qualifying service — full-pay service from age 18, with reckonable service running from 18 for other ranks and 21 for officers. There's nothing to claim; it's administered as part of the redundancy process.

For statutory redundancy in a civilian job, you need two years' continuous service with that employer, and the dismissal has to actually be redundancy — your role no longer being needed.

Not every dismissal counts. Misconduct dismissals and voluntary resignation don't qualify.

If a civilian redundancy figure looks wrong, Citizens Advice will check it with you for free before you accept it.

What benefits does this provide?

  • Financial Security: Provides a lump sum payment to help ease the transition to civilian life, covering immediate expenses and reducing financial stress.
  • Career Transition Support: Offers resources and guidance for job searching, retraining, or starting a new career, helping veterans find suitable employment opportunities.
  • Skill Development: Funds may be used for education and training programmes, allowing veterans to acquire new skills or enhance existing ones, increasing employability.
  • Debt Management: Assists in paying off existing debts, improving financial stability and credit scores.
  • Relocation Assistance: Covers costs associated with moving to a new location for job opportunities or personal reasons, easing the burden of relocation expenses.
  • Healthcare Access: Provides financial support for healthcare needs, ensuring veterans can access necessary medical services during the transition period.
  • Emotional Well-being: Reduces stress and anxiety associated with job loss, contributing to better mental health and overall well-being.

How do I apply?

  • Check Eligibility: Ensure you meet the criteria for redundancy payment, such as length of service and employment status.
  • Gather Documentation: Collect necessary documents, including your employment contract, redundancy notice, and any correspondence related to your redundancy.
  • Contact Your Employer: Reach out to your employer or HR department to confirm the redundancy process and payment details.
  • Submit a Claim: If your employer does not automatically process your redundancy payment, submit a claim through the appropriate government agency or tribunal.
  • Follow Up: Keep track of your claim's progress and maintain communication with your employer or the relevant agency.
  • Seek Advice: If you encounter issues, consider seeking advice from a legal professional or a support organisation specialising in employment rights.
  • Understand Your Rights: Familiarise yourself with your rights regarding redundancy to ensure you receive the correct payment.

Common questions

Do armed forces personnel get redundancy pay?

Yes, but through the Armed Forces Redundancy Scheme rather than civilian statutory redundancy, because service personnel are not employees for that purpose.

Is armed forces redundancy pay tax-free?

Yes. The AFRS lump sum is tax-free, and it is paid in addition to any terminal benefits you are due, including a Resettlement Grant, EDP income, EDP lump sum, pension and pension lump sum.

Do you need two years of service to get redundancy pay?

That two-year rule is the civilian statutory test, and it applies to a later civilian job. Armed Forces Redundancy Scheme entitlement follows your pension scheme and qualifying service instead.

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Last reviewed 26 August 2026 by Brittany Belt, Co-founder and COO