How Statutory Redundancy Pay is Calculated in the UK
Statutory redundancy pay is the legal minimum financial compensation your employer must provide if you are dismissed by reason of redundancy after completing at least two continuous years of employment. The formula is set by Section 162 of the Employment Rights Act 1996.
Calculations work backwards from your redundancy termination date, counting complete years of service up to a maximum of 20 years. For each completed year, you receive a multiplier of weeks based on your age during that specific year:
| Age During Completed Year | Statutory Multiplier | Max Value per Year (GB £751 Cap) | Max Value per Year (NI £783 Cap) |
|---|---|---|---|
| Under 22 years old | 0.5 week's pay | £375.50 | £391.50 |
| Aged 22 to 40 | 1.0 week's pay | £751.00 | £783.00 |
| Aged 41 and over | 1.5 weeks' pay | £1,126.50 | £1,174.50 |
2026/27 Statutory Redundancy Limits: Great Britain vs Northern Ireland
Statutory redundancy limits are revised every April in line with inflation. Because employment law is devolved in Northern Ireland, distinct statutory orders govern weekly pay caps:
| Statutory Metric | England, Wales & Scotland (GB) | Northern Ireland (NI) | Statutory Reference |
|---|---|---|---|
| Statutory Weekly Pay Cap | £751 per week | £783 per week | Employment Rights (Increase of Limits) Order 2026 |
| Maximum Counted Service | 20 years | 20 years | Section 162(3) ERA 1996 |
| Maximum Total Statutory Pay | £22,530.00 | £23,490.00 | Derived (20 yrs × 1.5 × Cap) |
| HMRC Tax-Free Exemption | £30,000.00 | £30,000.00 | Sections 401-403 ITEPA 2003 |
| Qualifying Service Period | 2 continuous years | 2 continuous years | Section 155 ERA 1996 |
Worked Redundancy Pay Examples
The following three case studies illustrate how statutory caps, age brackets, and backwards counting work in practice:
Age 26 • 4 Years Service
- Gross salary: £26,000 (£500/week)
- Completed years: 4 full years (started age 22)
- All 4 years in 22–40 band: 4 × 1.0 = 4 weeks
- Weekly pay (£500) is below £751 cap
Age 45 • 10 Years Service
- Gross salary: £36,400 (£700/week)
- Years aged 41–45 (5 years): 5 × 1.5 = 7.5 weeks
- Years aged 36–40 (5 years): 5 × 1.0 = 5.0 weeks
- Total weeks entitlement: 12.5 weeks
Age 62 • 24 Years Service
- Salary: £65,000 (£1,250/week)
- Service capped at 20 most recent years
- All 20 years at age 41+: 20 × 1.5 = 30 weeks
- Weekly pay capped at £751 (GB)
Age 42 • 8 Years Service
- Salary: £52,000 (£1,000/week uncapped)
- Policy: 2 weeks' pay per complete year
- 8 years × 2 weeks = 16 weeks' pay
- Statutory benchmark: £5,257 (7.0w @ £751)
Redundancy Ready-Reckoner Table (Weeks Entitled & £ at the Cap)
Use this ready-reckoner lookup table to quickly find your statutory weeks of redundancy entitlement based on your current age and continuous completed years of service. Figures in brackets show the statutory payout at the maximum 2026/27 GB cap of £751/week:
| Age | 2 Years | 5 Years | 10 Years | 15 Years | 20+ Years |
|---|---|---|---|---|---|
| Age 21 | 1.0w (£751) | 2.5w (£1,878) | — | — | — |
| Age 25 | 2.0w (£1,502) | 4.5w (£3,380) | — | — | — |
| Age 30 | 2.0w (£1,502) | 5.0w (£3,755) | 9.5w (£7,135) | — | — |
| Age 40 | 2.0w (£1,502) | 5.0w (£3,755) | 10.0w (£7,510) | 15.0w (£11,265) | 19.0w (£14,269) |
| Age 45 | 3.0w (£2,253) | 7.5w (£5,633) | 12.5w (£9,388) | 17.5w (£13,143) | 22.5w (£16,898) |
| Age 50 | 3.0w (£2,253) | 7.5w (£5,633) | 15.0w (£11,265) | 20.0w (£15,020) | 25.0w (£18,775) |
| Age 60+ | 3.0w (£2,253) | 7.5w (£5,633) | 15.0w (£11,265) | 22.5w (£16,898) | 30.0w (£22,530) |
Tax on Redundancy Pay: The HMRC £30,000 Exemption Explained
One of the most common questions is how HMRC taxes severance packages. In the UK, termination payments are divided into two distinct tax treatments:
Tax-Free up to £30,000
Under Section 401 of ITEPA 2003, genuine redundancy payments (both statutory redundancy pay and discretionary non-contractual severance sums) are completely free of Income Tax and National Insurance up to £30,000.
If your total redundancy pay exceeds £30,000, only the excess is subject to Income Tax at your marginal rate (20%, 40%, or 45%). Crucially, employees pay no employee National Insurance on redundancy sums over £30,000.
Taxable from £1: PILON & Holiday
Pay in Lieu of Notice (PILON) and accrued untaken holiday pay do not qualify for the £30,000 tax exemption.
Under UK post-employment notice pay (PENP) rules, these payments are treated as standard employment earnings. They are subject to both Income Tax and employee Class 1 National Insurance deductions from the first pound.
Statutory Notice Periods in Redundancy
In addition to statutory redundancy pay, employers must provide either a statutory notice period or payment in lieu of notice (PILON). The legal statutory minimums under Section 86 of the Employment Rights Act 1996 are:
- At least 1 month but under 2 years' service: 1 week of statutory notice.
- Between 2 and 12 complete years' service: 1 week of notice for every complete year of continuous service.
- 12 or more complete years' service: 12 weeks of notice (the statutory maximum).
Note: Your employment contract may specify a longer notice period (e.g. 1 month, 3 months, or 6 months). Your employer must honor whichever notice period is longer: the statutory minimum or your contractual term.
Enhanced and Contractual Redundancy Schemes (2 or 3 Weeks' Pay)
Many UK employers offer enhanced (non-statutory) redundancy schemes—frequently providing 2 weeks' pay or 3 weeks' pay per year of continuous service instead of the statutory age-graded multipliers.
Actual Weekly Pay
Company schemes typically pay on your full, un-capped weekly salary rather than the statutory £751 limit.
2 or 3 Weeks Multipliers
Paying a flat 2 or 3 weeks of salary per completed year, regardless of whether you were under or over age 41.
Uncapped Service Years
Many employer schemes reward all continuous years of service rather than capping entitlement at 20 years.
Comparison: Statutory vs 2 Weeks vs 3 Weeks' Pay (Worked Example)
Here is how a 42-year-old employee earning £52,000 per year (£1,000/week) with 8 complete years of continuous service compares across different scenarios:
| Redundancy Scheme | Entitlement Formula | Weekly Pay Basis | Total Payout | Uplift vs Statutory | Tax Treatment |
|---|---|---|---|---|---|
| Statutory Minimum | 7.0 weeks (backwards count) | Capped at £751 | £5,257.00 | Baseline | 100% Tax-Free |
| 2 Weeks / Year Scheme | 16.0 weeks (8 yrs × 2w) | Actual £1,000 | £16,000.00 | +£10,743 (+204%) | 100% Tax-Free |
| 3 Weeks / Year Scheme | 24.0 weeks (8 yrs × 3w) | Actual £1,000 | £24,000.00 | +£18,743 (+356%) | 100% Tax-Free |
Always inspect your staff handbook, trade union collective agreement, or formal consultation letter to verify whether enhanced terms apply to your redundancy. You can switch between statutory and enhanced schemes using the calculator above.
Who is Not Entitled to Statutory Redundancy Pay?
Under UK law, you do not qualify for statutory redundancy pay if:
- You have completed less than two continuous years of employment with your employer.
- You are classified as a self-employed contractor, agency worker, or partner.
- Your employer offers you suitable alternative employment that you unreasonably refuse.
- You are dismissed for gross misconduct rather than genuine redundancy.
- You are in certain exempted professions, such as police officers, members of the armed forces, or share fishermen.
Frequently Asked Questions About UK Redundancy Pay
Clear, factual answers to common questions about redundancy entitlements, tax rules, and employee rights.