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UK Statutory Redundancy Pay: A Complete Guide

Statutory redundancy pay is the minimum financial compensation you are legally entitled to when your employer makes your position redundant. It is a right established under the Employment Rights Act 1996 (ERA 1996) and applies to all qualifying employees in England, Wales, Scotland, and Northern Ireland (with slightly different rules applying in NI). Understanding your entitlement — and how it is calculated — protects you from accepting a package below what the law requires.

Qualifying for Statutory Redundancy Pay

To qualify for statutory redundancy pay, you must: be an employee (not self-employed or a contractor); have worked for your employer for at least two continuous years; and have been genuinely made redundant (as opposed to dismissed for misconduct or resigned). If you are under two years of service, you have no statutory redundancy entitlement — though your contract may provide for an enhanced payment.

Your employment must also be continuous. Breaks in service generally restart the clock, though there are exceptions for specific circumstances such as temporary layoffs or transfers of undertaking under TUPE (Transfer of Undertaking Protection of Employment) regulations. TUPE preserves continuity of service when a business is bought, sold, or a service contract changes hands.

The Age-Banded Formula

The statutory redundancy formula is deliberately age-weighted to provide greater protection to older workers who may face greater difficulty in finding re-employment:

Each complete year of service counts as: half a week's pay for service while under age 22; one week's pay for service while aged 22–40; and one and a half weeks' pay for service while aged 41 or older. The multiplier applies to service during each age band, not to the employee's current age across all years of service.

Weekly pay is capped at £643 for the 2024/25 tax year (reviewed every April by the Secretary of State and linked to the retail prices index). Service is capped at 20 qualifying years regardless of actual length of service. The maximum possible statutory redundancy payment is therefore £19,290 (20 years × 1.5 weeks × £643).

Enhanced Redundancy Packages

Employers may choose — or be contractually required — to offer enhanced redundancy payments above the statutory minimum. Enhancements commonly include: using actual weekly pay without the cap; applying a more generous multiplier (e.g., 2 or 3 weeks per year of service); counting all years of service without the 20-year cap; or paying a fixed lump sum in addition to the statutory amount. Always check your employment contract, company handbook, and any applicable collective agreement before accepting a redundancy offer.

Tax Treatment

The first £30,000 of a redundancy payment (statutory and enhanced combined) is completely free of income tax and National Insurance contributions. Amounts above £30,000 are subject to income tax at your marginal rate (20%, 40%, or 45%) but remain exempt from National Insurance. Notice pay, payment in lieu of notice (PILON), and accrued holiday pay do not benefit from the £30,000 exemption — they are taxed as ordinary employment income. Complex packages involving shares, cars, or benefits in kind require specialist advice.

The Redundancy Consultation Process

Employers are legally required to consult affected employees before making them redundant. For fewer than 20 redundancies, consultation must be "meaningful" but there is no prescribed minimum period. For 20 or more redundancies within 90 days, the employer must begin collective consultation at least 30 days in advance (45 days for 100 or more redundancies) and notify the Redundancy Payments Service. Failure to properly consult can result in a protective award of up to 90 days' pay per employee at an Employment Tribunal.