How statutory redundancy pay is calculated

The government uses a fixed formula based on three factors: your age during each year worked, your years of continuous service, and your weekly pay (capped at £643 in 2025/26). It’s calculated year-by-year, working backwards from the date your job ends.

Your age during that year of serviceWeeks’ pay you earn
Under 22½ week’s pay
22 to 401 week’s pay Most workers
41 and over1½ weeks’ pay
2025/26 Key figures

The weekly pay cap is £643 (England, Scotland and Wales). The maximum statutory payment is £21,570 — that’s 20 years × £643 × 1.5 weeks. Northern Ireland uses a slightly higher cap of £674/week, with a maximum of £22,470.

Tax on redundancy pay — the £30,000 rule

Statutory redundancy pay is always entirely tax-free, no matter the amount. However if your employer pays more than the statutory minimum, the entire package (statutory + enhanced) gets a combined £30,000 tax-free allowance.

Any amount above £30,000 is added to your income for that tax year and taxed at your marginal rate. So if you receive a £45,000 package, £15,000 would be taxable.

Important: Pay in lieu of notice (PILON), holiday pay, and bonuses are never part of redundancy pay. They’re always taxed as regular employment income, separate from the £30,000 rule.

Years of service: what counts

Only complete years of continuous service count — part-years are ignored. The maximum is 20 years, regardless of how long you’ve actually worked there. You need at least 2 complete years of service to receive any statutory payment.

Continuous service can include time with a previous employer if your business was transferred under TUPE rules, or if your employer was acquired.

Am I eligible?

You qualify for statutory redundancy pay if all of the following apply:

  • You’ve been employed continuously for at least 2 years
  • You were made redundant — not dismissed for misconduct, and didn’t resign
  • You’re an employee (not a worker, contractor, or self-employed)
  • You weren’t offered suitable alternative employment which you unreasonably refused

What if my employer won’t pay?

If your employer refuses or is unable to pay, you can claim through the government’s Redundancy Payments Service (RPS). You must normally claim within 6 months of your employment ending. If your employer is insolvent, the National Insurance Fund will pay you directly.

Can I get more than the statutory amount?

Many employers offer enhanced redundancy pay above the statutory minimum — this might be a higher weekly pay cap, extra years’ multiplier, or a lump sum addition. Always check your employment contract and company redundancy policy. The £30,000 tax-free rule applies to the full amount including both statutory and enhanced pay combined.

Frequently asked questions

Does redundancy pay count as income for Universal Credit?
Redundancy pay is treated as capital (savings), not income, for Universal Credit. If your total capital including the redundancy payment exceeds £16,000 you won’t be eligible for UC. Between £6,000 and £16,000 it reduces your UC award gradually by £4.35/month for each £250 over £6,000. Use our Universal Credit calculator above to check your full entitlement.
What’s the difference between statutory and enhanced redundancy?
Statutory redundancy is the legal minimum employers must pay under the Employment Rights Act 1996. Enhanced (or contractual) redundancy pay is anything above that — set out in your employment contract or company policy. You’re always entitled to whichever is higher. Some employers use your actual salary rather than the capped weekly pay, and some apply a higher multiplier per year worked.
Can I put my redundancy pay into my pension?
Yes, and this can be very tax-efficient if your package exceeds £30,000. Contributing the taxable element (above £30k) into a pension means you get income tax relief on it instead of paying tax on it as income. Higher-rate taxpayers effectively get 40% added to the contribution. This must normally be done before your employment ends. Speak to an independent financial adviser as the rules around timing and employer contributions are complex.
My employer is making me redundant while I’m on maternity leave — am I still eligible?
Yes. Being on maternity, paternity, adoption, or shared parental leave does not affect your right to statutory redundancy pay. Your continuous service period includes the leave. However your employer cannot make you redundant as a direct result of pregnancy or maternity leave — that would be automatic unfair dismissal and potentially discrimination.
Does taking voluntary redundancy affect my entitlement?
No — voluntary redundancy means you’ve agreed to be made redundant, not that you’ve resigned. You’re still dismissed by your employer, so you retain full statutory redundancy rights including the tax-free allowance. Volunteering for redundancy doesn’t make you ineligible for Universal Credit either, provided you meet the other qualifying conditions.
How soon must my employer pay me?
There’s no fixed legal deadline, but it should be paid on or shortly after your last day of employment — typically within the final pay period. If your employer fails to pay within a reasonable time, you can apply to an employment tribunal. The deadline for tribunal claims is generally 3 months minus one day from the date you should have been paid, though you must first notify ACAS via Early Conciliation before making a claim.