How Redundancy Pay Is Calculated in the UK

Statutory vs contractual redundancy pay

If you are made redundant, you may receive statutory redundancy pay (minimum set by law) or enhanced contractual redundancy pay (more generous terms in your contract or employer policy).

You must have at least two years’ continuous service with your employer to qualify for statutory redundancy pay. Some employers pay everyone regardless — check your contract.

The statutory redundancy formula

Statutory pay is based on full years of service (max 20 years), your age during each year of service, and a capped weekly pay figure.

For each qualifying year: half a week’s pay if you were under 22, one week’s pay if aged 22–40, one and a half weeks’ pay if 41 or older.

• Under 22: 0.5 week’s pay per year of service
• Age 22–40: 1 week’s pay per year
• Age 41+: 1.5 weeks’ pay per year
• Maximum 20 years counted
• Weekly pay capped at £700 (check GOV.UK for current cap)

Worked example

Age 45, 10 years’ service, £650 weekly pay: if all years fall in the 41+ band, that is 10 × 1.5 × £650 = £9,750 statutory redundancy pay. If some years were at younger ages, lower multipliers apply to those years.

Use our redundancy calculator to model your age, service and weekly pay.

What counts as weekly pay

Weekly pay is usually an average of gross pay over the 12 weeks before the redundancy notice date, including regular overtime and commission if contractual. Capped at the statutory weekly maximum.

Who does not get statutory redundancy

Employees with less than two years’ service, some apprentices, and those who unreasonably refuse suitable alternative employment may not qualify. Fixed-term contracts ending naturally are not always redundancy.

If your employer is insolvent, you may claim from the Redundancy Payments Service.

Notice periods and pay in lieu

Redundancy is separate from notice pay. You may get statutory or contractual notice pay plus redundancy pay. Payment in lieu of notice (PILON) may be taxed as earnings.

Tax on redundancy pay

Statutory redundancy pay up to £30,000 is often tax-free. Amounts above that or contractual extras may be taxable. HMRC rules are complex — check GOV.UK or ask HR for a breakdown.

Your rights when facing redundancy

Employers must follow fair consultation processes. You may have rights to time off to seek new work. ACAS and Citizens Advice offer free guidance. Do not sign settlement agreements without understanding the terms.

Calculate your statutory redundancy pay

Our Redundancy Pay Calculator UK estimates statutory pay from your age, years worked and weekly pay. Estimates only — your employer’s HR or GOV.UK provides official figures.