By Team SalaryCalculate · 9/23/2025
Facing redundancy or considering resignation? The financial implications of each choice can differ dramatically. Making the wrong decision could cost you thousands of pounds in lost benefits, pay, and future opportunities.
This comprehensive guide breaks down the financial differences between redundancy and resignation, helping you make an informed decision based on your specific circumstances.
Key Financial Differences
The most significant difference lies in what you receive when you leave. Redundancy typically provides statutory pay, notice pay, and potentially enhanced packages. Resignation usually means no additional compensation beyond your final salary.
| Aspect | Redundancy | Resignation |
|---|---|---|
| Statutory pay | Yes - based on age, service, and pay | No |
| Notice pay | Yes - full notice period | Depends on notice given |
| Enhanced packages | Often available | Rarely offered |
| Holiday pay | Accrued + notice period | Accrued only |
| Pension contributions | Until last working day | Until last working day |
| Jobseeker's Allowance | Eligible immediately | May have waiting period |
When Redundancy Makes Financial Sense
Redundancy often provides the better financial outcome, especially if you've been with the company for several years. Use our redundancy vs resignation calculator to see exactly how much you'd receive in each scenario.
Redundancy typically works best when:
• You have two or more years of service (statutory redundancy eligibility)
• You're over 22 (higher statutory rates)
• The company offers enhanced packages
• You're planning a career break or retirement
• You want immediate access to benefits
When Resignation Might Be Better
Resignation can sometimes be the smarter financial choice, particularly if you have a new job lined up or if the redundancy package is minimal.
Consider resigning when:
• You have less than two years' service (no statutory redundancy)
• You've secured a better job offer
• The redundancy process is taking too long
• You want to maintain control over your departure
• You're concerned about future job applications
Calculating Your Redundancy Package
Understanding your potential redundancy package is crucial for comparison. Use our redundancy pay calculator to work out your statutory entitlement, then consider any enhanced terms your employer might offer.
Your total redundancy package typically includes:
• Statutory redundancy pay (if eligible)
• Notice pay or pay in lieu of notice
• Accrued holiday pay
• Enhanced redundancy (if offered)
• Outstanding bonuses or commission
Negotiating Enhanced Redundancy
If you're facing redundancy, don't assume the first offer is final. Many employers are open to negotiation, especially for valued employees. Learn more about redundancy settlement negotiation to maximize your package.
Enhanced packages might include:
• Multiples of statutory redundancy (1.5x, 2x, or more)
• Extended notice periods
• Outplacement support
• Continued health insurance
Tax Implications
Both redundancy and resignation have different tax treatments that can significantly impact your take-home amount:
• Statutory redundancy pay: Tax-free up to £30,000
• Enhanced redundancy: Tax-free up to £30,000 total
• Notice pay: Taxed as normal income
• Holiday pay: Taxed as normal income
Benefits and Support
Redundancy often provides better access to government support and benefits:
• Jobseeker's Allowance: Immediate eligibility
• Universal Credit: May be available depending on circumstances
• Redundancy payment service: Free advice and support
• Career transition support: Often provided by employers
Career Impact Considerations
Beyond immediate finances, consider how each choice affects your career prospects:
Redundancy advantages:
• No gap in employment history
• Often includes positive reference
• Outplacement support for job search
Resignation advantages:
• Control over timing and circumstances
• Can start new job immediately
• Avoids potential stigma of redundancy
Making Your Decision
Use our redundancy settlement calculator to get precise figures for your situation, then consider these factors:
• Total financial package value
• Time to find new employment
• Career goals and opportunities
• Personal circumstances and preferences
• Market conditions in your industry
Alternative Options
Sometimes there are other options beyond simple redundancy or resignation. Explore redundancy alternatives that might work better for your situation.
These might include:
• Voluntary redundancy schemes
• Reduced hours or job sharing
• Career breaks or sabbaticals
• Internal transfers or redeployment
Frequently Asked Questions
Q: Can I negotiate redundancy terms?
A: Yes, many employers are open to negotiating enhanced redundancy packages, especially for valued employees or to avoid disputes.
Q: How long do I have to decide on redundancy?
A: You typically have a reasonable consultation period, but this varies by company. Don't feel pressured to decide immediately.
Q: Will redundancy affect my future job prospects?
A: Redundancy is generally viewed neutrally by employers - it's a business decision, not a reflection on your performance.
Q: Can I resign after being told I'm at risk of redundancy?
A: Yes, you can resign at any time, but you'll forfeit any redundancy pay and benefits. Consider the financial impact carefully.
The choice between redundancy and resignation is rarely straightforward. While redundancy typically offers better immediate financial benefits, resignation might be the right choice if you have a new opportunity or if the redundancy package is minimal.
Use the calculators and resources available to understand your exact financial position, consider your career goals, and make an informed decision that works for your circumstances. Remember, there's no one-size-fits-all answer - the best choice depends on your individual situation.
