How to Calculate Redundancy Pay (UK)
Statutory redundancy pay is based on age, years of service, and weekly pay. Use our guide to calculate entitlements and understand tax rules.
Statutory redundancy pay is a legal right for employees who have been continuously employed for at least 2 years and are being made redundant. Here's how to calculate it.
Eligibility
To qualify for statutory redundancy pay, you must:
- Have been an employee (not a contractor or agency worker)
- Have 2+ years continuous service
- Have been dismissed because of redundancy (role no longer exists)
The Calculation Formula
Statutory redundancy pay is calculated based on:
- Your age
- Length of continuous service (capped at 20 years)
- Weekly pay (capped at £719 for 2024-25)
Age-Based Multipliers
| Age When Made Redundant | Payment Per Year of Service |
|---|---|
| Under 22 | 0.5 week's pay |
| 22 to 40 | 1 week's pay |
| 41 and over | 1.5 week's pay |
Maximum Statutory Redundancy Pay
The maximum in 2024-25 is:
- £719 (weekly pay cap) × 1.5 × 20 years = £21,570
Calculation Example
Employee details:
- Age: 45
- Years of service: 12
- Weekly pay: £600
Calculation:
- 3 years under 22: N/A (wasn't employed then)
- 7 years aged 22-40: 7 × £600 = £4,200
- 2 years aged 41+: 2 × 1.5 × £600 = £1,800
- Total: £6,000
Weekly Pay Calculation
"Weekly pay" for redundancy is your normal week's pay, including:
- Basic salary
- Regular overtime (if guaranteed)
- Regular bonuses (if contractual)
It excludes:
- Discretionary overtime
- Discretionary bonuses
- Benefits in kind
For variable pay, use the average of the last 12 weeks before the redundancy notice was given.
Tax Treatment
| Component | Tax Treatment |
|---|---|
| First £30,000 | Tax-free |
| Above £30,000 | Taxed as income |
| Pay in lieu of notice | Taxable |
| Holiday pay owed | Taxable |
Example: If you receive £35,000 redundancy:
- £30,000 is tax-free
- £5,000 is added to your income and taxed at your marginal rate
Enhanced Redundancy
Some employers offer enhanced redundancy packages above the statutory minimum. This could be:
- Higher weekly pay multipliers
- More weeks per year of service
- No cap on weekly pay
Check your employment contract or company policy for details.
When Redundancy Pay Is Due
Statutory redundancy pay should be paid:
- On your last day of employment, OR
- Shortly after your employment ends
There's no legal deadline, but unreasonable delays can be challenged.
Frequently Asked Questions
- How much redundancy pay am I entitled to?
- Statutory redundancy is based on your age, years of service, and weekly pay (capped at £719 in 2025). The maximum statutory payment is £21,570.
- Is redundancy pay taxable?
- The first £30,000 of redundancy pay is tax-free. Any amount above £30,000 is taxed as income.
- How many years service do I need for redundancy pay?
- You need at least 2 years continuous service with the same employer to qualify for statutory redundancy pay.