Redundancy pay: how much you should get, and how it is worked out

If you are being made redundant, the first question is usually the money. Statutory redundancy pay follows a fixed formula, so you can work out your minimum entitlement in about two minutes - and spot quickly if your employer's figure is wrong.

Who gets statutory redundancy pay

You qualify for statutory redundancy pay if you are an employee with at least two years' continuous service and you are dismissed by reason of redundancy. Agency workers, casual staff and the genuinely self-employed are not covered.

You can lose the right if you unreasonably refuse a suitable alternative role your employer offers you, or if you are dismissed for gross misconduct during your notice period.

The statutory formula, step by step

Statutory redundancy pay is based on your age, your weekly pay and your complete years of service, capped at the last 20 years:

• Half a week's pay for each full year of service while you were under 22
• One week's pay for each full year of service aged 22 to 40
• One and a half weeks' pay for each full year of service aged 41 or over

Two caps apply. Weekly pay is capped at £751 (the limit from 6 April 2026), however much you actually earn, and only your most recent 20 years of service count. That puts the maximum statutory payment at £22,530, for someone aged 61 or over with 20 years of service on at least the capped weekly wage.

Your week's pay is based on your gross pay before tax. If your pay varies, it is usually averaged over the 12 weeks before your notice.

A worked example

A 45-year-old earning £600 a week with 12 years of service, all aged 22 or over, gets: 4 years at one and a half weeks (the years from 41 onwards) plus 8 years at one week. That is 6 plus 8, so 14 weeks' pay. 14 x £600 = £8,400.

If the same person earned £900 a week, the £751 cap bites: 14 x £751 = £10,514, not the £12,600 the raw figures would give.

What comes on top

Redundancy pay is rarely the whole package. You are also owed:

• Notice pay - your contractual notice or the statutory minimum (one week per year of service, up to 12), whichever is longer. Many employers pay in lieu instead.
• Accrued holiday you have not taken.
• Enhanced or contractual redundancy pay if your contract, handbook or long-standing custom provides it. Public sector and unionised schemes are often two or three times the statutory minimum, so check your contract before assuming the statutory figure is all there is.

The tax position

The first £30,000 of a genuine redundancy payment is tax-free, and no National Insurance is due on it. Anything above that is taxed as earnings. Notice pay and holiday pay are always taxed as normal pay, even if they arrive in the same lump sum.

When the redundancy itself is the problem

A bigger question than the maths is whether the redundancy is genuine and fairly run. If your role is being refilled, your duties have been handed to someone cheaper, or the selection criteria were written to catch you, you may have an unfair dismissal claim worth considerably more than the redundancy payment. Our guide on when to speak to a redundancy solicitor covers the warning signs, and unfair dismissal compensation explains what a claim can be worth.

Employers also regularly use settlement agreements to close out redundancies, usually with something above the statutory minimum in exchange for waiving your claims. Read what to do when you are offered a settlement agreement before you sign anything.