Redundancy Pay UK: How Statutory Redundancy Pay Is Calculated and What You Are Owed

Who Qualifies for Statutory Redundancy Pay

Employees with at least 2 years of continuous employment with the same employer are entitled to statutory redundancy pay when they are made redundant. Agency workers, the self-employed and most contractors are not employees and are not entitled to statutory redundancy pay. Fixed-term employees whose contract is not renewed may be entitled to redundancy pay if the non-renewal amounts to a dismissal and they have 2 years of continuous service.

How Statutory Redundancy Pay Is Calculated

Statutory redundancy pay is calculated based on three factors: age, years of continuous service (up to a maximum of 20 years) and weekly pay (capped at £700 per week from April 2026). The formula is: half a week's pay for each full year of service while under 22; one week's pay for each full year of service between ages 22 and 40; one and a half weeks' pay for each full year of service at 41 or older. The maximum statutory redundancy payment in 2026 is therefore 30 weeks x £700 = £21,000.

The Weekly Pay Cap

The weekly pay cap for statutory redundancy pay purposes is reviewed annually by the government. From April 2026, the cap is £700 per week. Employees earning above this amount have their redundancy calculation capped at £700 per week regardless of their actual weekly earnings. Enhanced redundancy schemes under employment contracts may use actual weekly pay without the statutory cap.

Tax Treatment of Redundancy Pay

Statutory redundancy pay and contractual redundancy pay are exempt from income tax and National Insurance up to a combined total of £30,000. Payments above £30,000 are subject to income tax (but not National Insurance on the excess above £30,000) in the tax year received. Pay in lieu of notice (PILON), holiday pay owed and other payments may be treated differently depending on whether they form part of a termination package or are contractual entitlements.

Your Rights During Redundancy

Employees under threat of redundancy are entitled to a consultation period, alternative employment if available, time off to look for new work (a minimum of 40% of working time for employees with 2 years of service), and payment of accrued but untaken holiday. Collective redundancy rules (TUPE) apply where 20 or more employees are being made redundant within 90 days -- employers must notify the Secretary of State and follow a minimum consultation period of 30 or 45 days depending on the number affected.

Frequently Asked Questions

How much redundancy pay am I entitled to?

Statutory redundancy pay is calculated using your age, years of service (capped at 20 years) and weekly pay (capped at £700 per week from April 2026). The GOV.UK redundancy calculator provides a precise figure based on your details. The maximum statutory payment is £21,000.

Is redundancy pay taxable?

Redundancy pay -- both statutory and enhanced -- is exempt from income tax and National Insurance up to £30,000. Payments above this threshold are subject to income tax (but not NI on the portion above £30,000). The £30,000 exemption applies to the total termination payment, not just redundancy pay.

Can my employer offer less than statutory redundancy pay?

No. Statutory redundancy pay is the legal minimum. Employers cannot offer less than the statutory amount to qualifying employees. They can offer more (enhanced redundancy pay) but not less. An agreement to accept less than statutory redundancy pay is not legally binding.

What if my employer cannot pay redundancy?

If your employer is insolvent and cannot pay statutory redundancy, you can claim from the National Insurance Fund via the Insolvency Service. The Insolvency Service pays statutory redundancy pay (subject to the weekly cap and maximum weeks) directly to employees of insolvent employers.