Ill Health Redundancy Pay - Your Employer Obligations

Sick employees are entitled to redundancy pay, in line with the number of years of service that they have with the company and their age.


James Rowland

Commercial Director James leads Account Management, Sales and Marketing at Neathouse Partners.


17 January 2022


16 July 2024
5 min read

If you are making redundancies in your workplace and have staff on long-term sick leave, then you may have questions about ill health redundancy pay. 

Staff on sick leave must be treated no differently from staff that are in the office when it comes to managing redundancy in the workplace. Sick members of staff are entitled to statutory redundancy pay and company redundancy pay if offered, in line with the number of years of service that they have with the company and their age. 

They can also continue to receive sick pay during the redundancy consultation and notice period, and this must not be deducted from any redundancy pay that is due. Redundancy pay for sick employees should be calculated using an employee's full pay, not the reduced sick pay that they are currently in receipt of.


HR and Redundancy Advice For Employers 

Neathouse Partners provide redundancy advice for employers. Our solution-driven, personal service ensures that employers have access to a named and dedicated HR or employment lawyer to help them expertly navigate HR best practice and employment law, regardless of how complex the issue may seem. 

Redundancy is a challenging process that must be handled correctly to ensure employers don’t leave themselves open for employment tribunals and discrimination claims. It’s therefore important to have experienced HR support from a team that can advise you every step of the way, and Neathouse Partners can help.

Read on to find out how to manage the process of redundancy and pay entitlements when dismissing sick employees in line with UK Employment Law, along with the steps that you can follow to minimise the chance of being hit with claims of unfair dismissal during these difficult conversations.

Redundancy and Sick Pay Entitlements 

If an employee is being made redundant whilst they are on sick leave or following an extended period of sick leave, it may affect the amount of redundancy payment that they are entitled to because statutory redundancy pay is calculated based on the number of years’ service that the employee has with the company and their age. The number of years of service will include periods of sick leave if they fall within the brackets below. 

When calculating the length of an employee's service with the company, you should include the following periods of sick leave:

  • Up to 26 consecutive weeks of absence from work due to illness
  • Up to 52 consecutive weeks of absence from work due to injury at work 

When calculating redundancy payments for workers currently on sick leave or following an extended period of sick leave, you will need to include their absent periods as part of their total length of service if they fall within the timeframes above.

To assist in working out statutory redundancy pay, you can use the government’s statutory redundancy pay calculator here. Whilst statutory redundancy pay is mandated, some companies choose to offer more than this as either a gesture of goodwill or as part of their employee benefits package. 


Are Workers Entitled To Sick Pay And Redundancy Pay? 

If you are making staff redundant and they are currently on sick leave, they are still entitled to their sick pay throughout the period of redundancy, including any notice periods issued. 

Any sick pay that is owed during the redundancy period, cannot be used to reduce the amount of redundancy pay that the employee is entitled to and redundancy pay should be based on the employee's usual pay, not their sick pay entitlement. 


Managing Redundancy of Sick Employees 

Box of employee belonging on a work desk

Dismissal of any kind must be managed carefully to avoid claims of discrimination or unfair dismissal and this is even more important in cases of employee ill health. Despite the common misconception, employers can make workers redundant if they are suffering from long-term ill health, are currently on sick leave, or are frequently away from the office due to illness - as long as a fair redundancy process is followed. 

You must be able to show that you are not dismissing the employee because of their condition but on the grounds of capability in line with fair assessment criteria that apply to all employees.

In line with your regular redundancy policy, you must:

  • Inform all affected employees that they are at risk of redundancy and what they can expect during the process 
  • Use fair selection criteria and consider alternative job roles
  • Provide a 4-week trial period for alternative employment, if an alternative role is found and the employee accepts
  • Ensure that statutory minimum redundancy payment is made, but you can offer more 
  • Provide a paid notice period in line with the number of years of service the employee has given the company. This would be at least one week’s notice if employed between one month and 2 years, one week’s notice for each year if employed between 2 and 12 years and 12 weeks’ notice if employed for 12 years or more
  • Continue to issue sick pay throughout the redundancy period 

When managing the process of redundancy when employees are away from the office on sick leave, you should ensure those on sick leave receive the same treatment as other staff but you may have to make some adjustments to meet their needs. 

For example, when going through the consultancy process, you might need to include options to attend meetings by phone instead of in person or send a union representative to their home. In all arrangements, you should be as flexible and accommodating as possible so that the employee feels that they are treated fairly and in line with other members of staff who are not currently off sick. 


As an employer, staff absence due to ill health and redundancies can be some of the most difficult conversations to have. Whilst your duty is to support the wellbeing of the worker, this must be balanced with the practical needs of the business. 

If you have reached the point where you need to make redundancies, this can legitimately include employees on sick leave if keeping the employee's job open is no longer viable and all other options have been considered. We hope that this article has helped to clear up your obligations regarding ill health redundancy pay. 

To recap; 

  • Redundancy should only be considered as a last resort and when there is a genuine business need to reduce headcount and if no other viable business options exist.
  • Fair selection criteria must be used to identify those at risk of redundancy and this can include those on sick leave or suffering from ill health
  • Ensure that statutory minimum redundancy payment is made, but you can offer more 
  • Calculating redundancy pay for employees who are receiving sick pay should be based on the employee's usual pay, not their sick pay entitlement. 
  • A paid notice period should be provided in line with the number of years of service the employee has given the company even if they are currently on sick leave.
  • Ensure that statutory and company sick pay entitlements are paid and are not deducted from redundancy pay entitlement. 

Due to the sensitive nature of dismissals, especially regarding individuals suffering from ill health, you should fully consider the application of the Equality Act 2010 to ensure you have met your requirement to make reasonable adjustments for workers with over 2 years of service and any employee that satisfies the definition of ‘disability’ under the Act. 

Following a fair redundancy process as outlined in this article and with due consideration of the Equality Act, 2010 will ensure that you protect yourself from costly and time-consuming claims of unfair dismissal or discrimination on the grounds of medical conditions.


Getting Help With Redundancies

Neathouse Partners can assist employers with all aspects of employment and HR law including providing advice and support regarding redundancy and redundancy pay calculations. 

We can help you to deal with difficult discussions in the sensitive manner they need, as you navigate the challenging period of redundancy and restructuring. Our team will help you to ensure that your employees are treated fairly and that you meet your obligations under UK Employment Law. 

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