Statutory redundancy pay is a legal minimum for employees with at least two years’ continuous service: half a week’s pay for each full year worked while under 22, one week for each year between 22 and 40, and one and a half weeks for each year at 41 or over. Weekly pay is capped at £751 for redundancies from 6 April 2026 and service at 20 years, so the maximum is £22,530. The payment is tax free, and the first £30,000 of a redundancy package as a whole is tax free. Employers can pay more under a contract or a negotiated settlement, but never less.
Who qualifies
The right applies to employees, not the self-employed or agency workers, dismissed by reason of redundancy after at least two years’ continuous service with the same employer. Fixed-term employees qualify when a contract of two years or more ends without renewal because the work has gone. The entitlement is lost if the employer offers suitable alternative work and the employee turns it down without good reason, or if the dismissal is in fact for misconduct. Where the employer is insolvent, the payment is claimed from the government’s Redundancy Payments Service instead.
How the weeks are counted
| Age during the year of service | Weeks’ pay for that year |
|---|---|
| Under 22 | 0.5 |
| 22 to 40 | 1 |
| 41 and over | 1.5 |
Each full year of service is scored at the age you were during that year, counting back from the date the notice period ends. Only the most recent 20 years count, and a week’s pay is your normal weekly gross pay before tax, averaged over the previous twelve weeks if it varies, up to the £751 cap. Part years are ignored, so someone with four years and eleven months is paid for four years. The redundancy pay calculator applies the age bands, the weekly cap and the 20-year limit for any age, service and pay.
What the formula produces
| Age | Years of service | Weekly pay | Weeks | Statutory pay |
|---|---|---|---|---|
| 25 | 3 | £400 | 3 | £1,200 |
| 30 | 5 | £500 | 5 | £2,500 |
| 40 | 8 | £650 | 8 | £5,200 |
| 45 | 10 | £600 | 12 | £7,200 |
| 50 | 12 | £751 | 16.5 | £12,391.50 |
| 55 | 20 | £900, capped at £751 | 27 | £20,277 |
| 61 | 25, capped at 20 | £1,200, capped at £751 | 30 | £22,530 |
The 45-year-old with ten years’ service earns six weeks for the four years worked from 41 and six for the six years before, hence twelve weeks. The cap matters most for higher earners with long service: the 55-year-old on £900 a week is paid on £751, losing about £4,000 against an uncapped figure. Anyone earning under the cap is paid on their real weekly pay.
Tax on a redundancy package
| Element | Tax treatment |
|---|---|
| Statutory redundancy pay | Tax free, counts towards the £30,000 limit |
| Contractual or enhanced redundancy pay | Tax free up to the £30,000 limit combined, then taxed as income |
| Pay in lieu of notice | Taxed as normal earnings with National Insurance, whatever the contract says |
| Accrued holiday pay | Taxed as normal earnings |
| Salary and bonuses to the leaving date | Taxed as normal earnings |
Anything above £30,000 is added to your income for the year and taxed at your marginal rate, with the employer paying National Insurance on it at 15%; there is no employee National Insurance on the excess. A large payment in a single month can be taxed heavily under PAYE, especially after a P45 has been issued and the 0T code applies, with the balance reclaimed through a tax return or an in-year refund. Our guide to emergency tax covers the codes and the refund route. The take-home pay calculator shows the tax on the taxable part at your income level.
Notice pay and holiday
Redundancy pay is separate from notice. The statutory minimum notice is one week after a month’s service, then one week for each full year up to twelve weeks; the contract may give more. You are paid through the notice period at normal pay or receive a payment in lieu, and untaken holiday up to the leaving date must be paid. The holiday entitlement calculator works out what is owed for a part year. In a redundancy consultation the employer must also allow reasonable paid time off to look for work or arrange training once notice has been given.
Reducing the tax on the excess
Where a package exceeds £30,000, asking the employer to pay part of the excess directly into your pension avoids income tax on that part and uses the pension annual allowance rather than the redundancy exemption; the contribution counts as an employer payment. Timing can also matter: a payment that falls into a new tax year after your salary has stopped is taxed against a fresh personal allowance and basic rate band. The annual allowance calculator checks the room available.
After redundancy
New style Jobseeker’s Allowance is available for up to six months on the basis of National Insurance contributions, whatever your savings or a redundancy payment, and Universal Credit may be claimed alongside or instead, although a payment that takes savings above £16,000 rules it out until the money has been spent down. Our Universal Credit rates guide sets out the amounts and capital rules, and the JSA calculator covers the contribution-based benefit.
Common questions
How is statutory redundancy pay calculated? Half a week’s pay for each year under 22, one week for each year from 22 to 40 and one and a half weeks for each year from 41, on weekly pay capped at £751 and service capped at 20 years.
What is the maximum statutory redundancy pay in 2026/27? £22,530: 30 weeks at the £751 cap, reached by someone with 20 years’ service all worked from age 41.
Is redundancy pay taxed? Statutory redundancy pay is tax free. The first £30,000 of the whole package, including any enhanced payment, is tax free; the excess is taxed as income. Notice pay and holiday pay are always taxed.
Do I qualify after 18 months? No. The statutory payment needs two years’ continuous service. Contractual redundancy schemes may be more generous, and notice pay is due from one month’s service.
Does the cap on a week’s pay apply to everyone? Yes. Weekly pay above £751 is ignored for the statutory calculation, so higher earners are paid on £751 a week. Many employers’ own schemes use actual pay.
Can my employer pay less than the statutory amount? No. It is a legal minimum. If the employer cannot pay because it is insolvent, the Redundancy Payments Service pays the statutory amount from the National Insurance Fund.
Information, not legal or financial advice. Limits are the published figures on gov.uk: redundancy pay for redundancies from 6 April 2026 and apply in England, Scotland and Wales; Northern Ireland sets its own cap. Worked figures are from the site’s calculator. Check your contract and take advice on a settlement before acting on them.