Statutory redundancy pay

In plain English

Statutory redundancy pay is the legal minimum sum a UK employer must pay to an employee whose role is being made redundant, provided the employee has been continuously employed for at least two years at the redundancy date. It is set by section 162 of the Employment Rights Act 1996.

The formula

Redundancy pay is calculated by length of service and age band:

• Under 22 at the time of service — half a week's pay for each year worked at that age
• 22 to 40 — one week's pay for each year worked at that age
• 41 and over — one and a half weeks' pay for each year worked at that age

Maximum 20 years of service can be counted. A weekly pay cap is applied to the calculation — set annually (£700 for 2024–25, reviewed each April; always verify on gov.uk).

Worked example

A 45-year-old with 12 years' continuous service, average weekly pay £900 (capped at £700):

• 4 years aged 41+ = 4 × 1.5 weeks = 6 weeks
• 8 years aged 22–40 = 8 × 1 week = 8 weeks
• Total: 14 weeks × £700 = £9,800

Tax treatment

Statutory redundancy pay is tax-free up to £30,000. Any payment above that, plus any contractual enhanced redundancy pay, is taxed in the normal way through PAYE.

When it isn't owed

• Less than two years' continuous service at the redundancy date
• Genuine self-employed status (not an employee)
• Where the employee unreasonably refuses a suitable alternative role
• Some agency and casual arrangements where employee status is contested

Enhanced redundancy

Many employers pay more than the statutory minimum — it's a common contractual benefit and a common feature of redundancy negotiations. Enhanced schemes typically use multipliers of the statutory formula or fixed weeks of pay per year of service.