Statutory redundancy pay explained: how much you're owed
Being made redundant is stressful enough without also having to decode how the payout was calculated. Statutory redundancy pay follows a fixed formula — here's how it actually works.
Who qualifies
To qualify for statutory redundancy pay in the UK, you generally need at least two years of continuous service with your employer, and your role needs to genuinely no longer exist — redundancy is about the job disappearing, not performance. Employees who don't meet the service requirement, or who are offered and unreasonably refuse suitable alternative employment, typically won't qualify for the statutory payment.
How the age-banded formula works
Statutory redundancy pay is calculated from three inputs: age during each year of service, length of service (capped at 20 years), and weekly pay (capped at a government-set maximum, reviewed periodically). The multiplier increases with age: half a week's pay for each full year worked under 22, one week's pay for each full year worked between 22 and 40, and one and a half week's pay for each full year worked at 41 or older. Only the most recent 20 years of service count, even if you were employed longer.
Because weekly pay is capped for the statutory calculation, high earners with long service often receive noticeably less than their actual weekly salary would suggest — the cap, not their real pay, becomes the limiting factor.
Statutory vs contractual redundancy pay
Statutory redundancy pay is the legal minimum. Many employers — particularly larger organisations — offer enhanced contractual redundancy schemes on top of, or instead of, the statutory formula, sometimes calculated as a multiple of salary per year of service rather than the capped statutory rates. Always check your contract or staff handbook; the statutory formula is a floor, not necessarily what you'll actually receive.
How it's taxed
Statutory redundancy pay is usually tax-free up to a set threshold (currently £30,000 combined with most other genuine termination payments), with amounts above that threshold generally subject to Income Tax. Other elements of a final payslip — unpaid wages, holiday pay, notice pay — are taxed as normal income and aren't covered by this exemption, so a redundancy settlement is often a mix of tax-free and taxable components.
A quick note
The weekly pay cap and tax-free threshold are reviewed periodically — always check current gov.uk figures, and your own contract, before relying on an exact number. See our full disclaimer.