Statutory redundancy pay is a lump sum payment you are entitled to receive from your employer when you are made redundant. To qualify, you must have been continuously employed by the same employer for at least two complete years. Employment status matters: you must be an employee, not a worker or self-employed contractor.
The payment is calculated by your employer and must be made on or before your final day of employment, or within a reasonable period thereafter. If your employer is insolvent, you can claim directly from the National Insurance Fund via GOV.UK.
The Formula
The calculation uses three inputs: your age at the date of redundancy, your gross weekly pay (subject to the £751 cap), and the number of complete years of continuous service — up to a maximum of 20 years. Part-years do not count.
The multiplier varies by age band. For each complete year of service worked while under 22, you receive half a week's pay. For each year worked between the ages of 22 and 40, you receive one week's pay. For each year worked aged 41 or over, you receive one and a half weeks' pay. Where your service spans more than one age band, each portion is calculated at the applicable rate.
Example: an employee aged 45 with 12 years' service and a weekly pay of £900 (capped at £751). Years aged 41–45: 4 years at 1.5 weeks = 6 weeks. Years aged 33–40: 8 years at 1 week = 8 weeks. Total: 14 weeks × £751 = £10,514.
| Age at redundancy | Weeks' pay per year of service |
|---|---|
| Under 22 | 0.5 weeks |
| 22 to 40 | 1 week |
| 41 and over | 1.5 weeks |
What Counts as a Week's Pay
For redundancy pay purposes, a week's pay is your gross basic weekly wage — the figure before tax and National Insurance. If you are paid monthly, divide your gross annual salary by 52. If your pay varies, the calculation uses an average over the 12-week period immediately before your redundancy notice was given.
Regular contractual overtime counts if your employer is obliged to offer it and you are obliged to work it. Discretionary overtime, commission, and most bonuses do not count unless they are guaranteed under your contract. The weekly pay figure used cannot exceed the statutory cap of £751 regardless of your actual earnings.
Continuous Service
Only complete years of continuous employment count. If you have worked for eight years and seven months, eight years are counted. Service is generally continuous if there has been no break in employment with the same employer. Employment that transferred under TUPE regulations carries over — the new employer inherits the service record.
Certain breaks do not interrupt continuity: statutory maternity, paternity, adoption, and shared parental leave all preserve continuous service. A period of sickness absence, provided employment was not formally terminated, also preserves continuity. If you changed roles within the same organisation without a break, the full combined service period counts.
Tax
Statutory redundancy pay is exempt from income tax and National Insurance up to £30,000. In most cases, the statutory payment will fall well within this threshold and will be paid in full without deduction. The £30,000 exemption applies to the total of all termination payments — if you are also receiving a settlement payment, a notice payment in lieu, or ex gratia pay, these may aggregate and the combined figure could exceed the threshold.
Payments that represent earnings — notice pay, accrued holiday, and salary in lieu — are taxable regardless of how they are labelled. Only payments made specifically in connection with the termination of employment benefit from the £30,000 exemption. If you are uncertain how your payments have been classified, ask your employer to confirm in writing before you accept any offer.
Enhanced Redundancy Pay
Some employers offer enhanced redundancy terms above the statutory minimum — a higher multiplier, a higher weekly pay cap, or both. These terms are contractual. Check your employment contract, your staff handbook, and any applicable collective agreement. If enhanced terms exist but are not being applied, raise this in writing. Enhanced terms must be applied consistently; an employer cannot offer them selectively without risk of a discrimination claim.
For a full account of when and how redundancy pay is owed, see Your Rights. For information on how redundancy pay interacts with notice pay and settlement agreements at the point of termination, see After Redundancy.