Redundancy pay: how it is calculated
The short answer
Statutory redundancy pay is half a week's pay for each full year worked under age 22, one week's pay for each year aged 22 to 40, and one and a half weeks' pay for each year aged 41 or over. Service is capped at 20 years and weekly pay at £751, so the maximum is £22,530.
If you are an employee with at least two years’ continuous service and you are made redundant, you are entitled to statutory redundancy pay. It is worked out from three things: your age during each year of service, how many full years you have worked (up to 20), and your weekly pay (capped at £751 for redundancies on or after 6 April 2026). The most anyone can get under the statutory scheme is £22,530.
Many employers pay more under an enhanced or contractual scheme. Whatever the total, the first £30,000 of redundancy and severance pay is usually tax-free, but notice pay and holiday pay are taxed in full. This guide covers Great Britain; Northern Ireland has its own rules.
Who qualifies
Under section 155 of the Employment Rights Act 1996, you need at least two years’ continuous employment ending with the date your employment ends. You also need to be an employee. Acas says agency workers, casual workers and people on zero-hours contracts who are not employees do not qualify, and nor do some specific groups such as the armed forces, police and Crown servants. See employment status if you are unsure.
You can lose the right to statutory redundancy pay if you unreasonably refuse an offer of suitable alternative work, or do not tell your employer within the four-week trial period that a new job is unsuitable. Our redundancy hub explains this.
How statutory redundancy pay is worked out
Section 162 says you count back from the date your employment ends, take each full year of service, and allow for each year:
| Your age during that year of work | Pay for each full year |
|---|---|
| Under 22 | Half a week’s pay |
| 22 to 40 | One week’s pay |
| 41 or over | One and a half weeks’ pay |
Two limits apply:
- Service is capped at 20 years. Counting backwards, any years before your most recent 20 are ignored.
- Weekly pay is capped. If you were made redundant on or after 6 April 2026, the cap is £751 a week. Earlier redundancies use lower caps.
What counts as a week’s pay
GOV.UK says your weekly pay is the average you earned per week over the 12 weeks before the day you got your redundancy notice. Acas says that if your hours vary, your employer uses your average hourly rate over a 12-week period. If you were paid less than usual because you were on furlough, GOV.UK says the calculation uses what you would normally have earned.
A worked example
As an illustration only, with round numbers: you are 45 when your job ends, you joined at 35, so you have 10 full years’ service, and you earn £500 a week.
- Years worked aged 41 to 44: 4 years × 1.5 weeks = 6 weeks
- Years worked aged 35 to 40: 6 years × 1 week = 6 weeks
- Total: 12 weeks × £500 = £6,000
If the same person earned £900 a week, the cap would apply: 12 weeks × £751 = £9,012.
The maximum of £22,530 is 20 years, all at age 41 or over, at one and a half weeks’ pay of £751. GOV.UK has an online redundancy pay calculator if you want to check your own figures.
The written statement
When your employer makes a redundancy payment (other than one ordered by a tribunal), section 165 says it must give you a written statement showing how the amount was calculated. It is worth checking that statement against your own figures, especially your start date and weekly pay.
Enhanced and contractual redundancy pay
Statutory pay is a minimum. Acas notes that employers may top it up, which is often called enhanced or contractual redundancy pay. Up to £30,000 of the combined total is usually tax-free (see below).
Whether you have a legal right to an enhanced payment depends on where it comes from. Look for it in:
- your contract or offer letter;
- a staff handbook or redundancy policy that is stated to form part of your contract;
- a collective agreement with a trade union.
Check whether the scheme is described as contractual or as discretionary, and whether your employer says it can change it. Your employer may also ask you to sign a settlement agreement to receive an enhanced sum; that agreement is only binding if you have had independent legal advice from a relevant adviser.
Tax and National Insurance
GOV.UK says statutory redundancy pay under £30,000 is not taxable. More precisely, you do not usually pay tax on the first combined £30,000 of statutory redundancy pay plus any additional severance or enhanced redundancy pay. Anything above £30,000 is taxed. Your employer pays employer Class 1A National Insurance on the amount over £30,000.
Some parts of a leaving package are always taxed in full, with National Insurance, and do not use up the £30,000:
- unpaid wages;
- holiday pay;
- bonuses;
- notice pay, including payment in lieu of notice;
- payments for agreeing to restrictive covenants.
As an illustration only: if you receive £40,000 of statutory and enhanced redundancy pay, plus £5,000 in lieu of notice, the £5,000 is taxed as pay, and £10,000 of the redundancy money is taxed because it is above £30,000.
When redundancy pay is not paid
Section 164 says you must, within six months starting with the date your employment ended, do one of these: agree and receive the payment, make a written claim to your employer, refer the claim to an employment tribunal, or bring an unfair dismissal claim. A tribunal can allow a claim in the following six months if it thinks that just and equitable. Acas lists statutory redundancy pay among the claims with a six months less a day time limit. You need to contact Acas for early conciliation before most tribunal claims.
If your employer is insolvent, you can apply to the government for redundancy pay, as well as holiday pay, unpaid wages and statutory notice pay.
If an enhanced payment is a term of your contract and is not paid, that is a claim under your contract. GOV.UK says a tribunal can award up to £25,000 in a breach of contract claim. In Scotland, the six-month time limit for breach of contract claims in the tribunal starts on 9 November 2026; before that the old three-month limit applies.
What to check in your contract or letter
- Your start date, and any earlier service that counts as continuous (for example after a TUPE transfer).
- Your weekly pay figure and the 12-week period your employer used.
- The date your employment ends, which fixes your age bands and whether the £751 cap applies.
- An enhanced or contractual redundancy scheme in your contract, handbook or a collective agreement, and whether it is described as discretionary.
- Conditions attached to enhanced pay, such as signing a settlement agreement.
- Your notice clause and any PILON clause, since notice pay is taxed separately.
- Holiday pay owed for untaken leave.
- Clawback or repayment clauses on bonuses, training costs or relocation.
- The written statement of how your redundancy pay was calculated.
When to speak to a solicitor
The statutory calculation is mechanical and you can check it yourself. It can help to speak to a solicitor if your employer disputes your length of service or employee status, an enhanced scheme has been withdrawn, you are offered a settlement agreement, or you think your selection for redundancy was unfair.
Not sure what yours says? Upload your contract or the letter you've been sent, and we'll show you what it gives you, what it asks of you and the deadlines in it, with the wording behind each.
Check my contractCommon questions
Do I qualify for statutory redundancy pay?
You normally need to be an employee with at least two years' continuous employment with your employer, ending with the date your employment ends. Agency workers, casual workers and most people on zero-hours contracts are not employees and do not qualify. Acas lists some other groups who cannot claim, including members of the armed forces, police and Crown servants.
What is the maximum statutory redundancy pay in 2026?
If you were made redundant on or after 6 April 2026, weekly pay is capped at £751 and the most you can get is £22,530. That is 20 years at one and a half weeks' pay, at the capped weekly rate. Lower caps apply to redundancies before 6 April 2026.
Is redundancy pay taxable?
Statutory redundancy pay and any extra severance or enhanced redundancy pay are added together, and you do not usually pay tax on the first £30,000. Anything above that is taxed. Notice pay, including pay in lieu of notice, holiday pay, unpaid wages and bonuses are taxed in full as earnings, whether or not your total is under £30,000.
What if my employer does not pay my redundancy pay?
Ask in writing first. If it still is not paid, you have six months, starting with the date your employment ended, to put a written claim to your employer or refer it to an employment tribunal. A tribunal can extend that by a further six months if it thinks it just and equitable. If your employer is insolvent, you can apply to the government's Redundancy Payments Service.
Can my employer pay less than statutory redundancy pay?
No. Statutory redundancy pay is a legal minimum. Your employer can choose, or be bound by your contract or a collective agreement, to pay more, often called enhanced or contractual redundancy pay. When your employer pays you, it must give you a written statement showing how the amount was calculated.
Sources
- GOV.UK: Redundancy, your rights: redundancy pay checked Fri Oct 02
- Acas: Redundancy pay checked Fri Oct 02
- Employment Rights Act 1996, section 155 (two years' continuous employment) checked Fri Oct 02
- Employment Rights Act 1996, section 162 (amount of a redundancy payment) checked Fri Oct 02
- Employment Rights Act 1996, section 164 (claiming within six months) checked Fri Oct 02
- Employment Rights Act 1996, section 165 (written statement of calculation) checked Fri Oct 02
- GOV.UK: Redundancy, your rights: tax and National Insurance checked Fri Oct 02
- GOV.UK: Tax on termination payments: what you pay tax and National Insurance on checked Fri Oct 02
- GOV.UK: Your rights if your employer is insolvent checked Fri Oct 02
- Acas: Employment tribunal time limits (updated 1 October 2026) checked Fri Oct 02
- GOV.UK: Changing an employment contract: dealing with problems (£25,000 tribunal limit for breach of contract) checked Fri Oct 02
This guide is general information about employment law in Great Britain (England, Wales and Scotland). Northern Ireland has its own employment law. It isn't legal advice and doesn't take your circumstances into account.