How is statutory redundancy pay calculated in the UK?

Full answer

If you are made redundant in the UK and have been employed for at least 2 years, you are entitled to statutory redundancy pay. The calculation uses three variables: your age, your completed years of service, and your weekly pay. **Weekly pay cap (2025/26): £700/week** If you earn more than £700/week, redundancy pay is still calculated as if you earned exactly £700/week. The cap is updated annually in April. **Service bands** - Under age 22: 0.5 week's pay per year of service - Age 22--40: 1 week's pay per year of service - Age 41+: 1.5 weeks' pay per year of service Maximum years of service counted: 20 years **Worked example 1 -- standard case** Olivia, age 35, has worked for her employer for 8 complete years. Weekly pay: £550 (below cap). All 8 years fall in the 22--40 band: 8 x 1 week x £550 = £4,400 statutory redundancy pay **Worked example 2 -- higher earner** Daniel, age 45, has 12 years of service. Weekly pay: £900 (above cap, so capped at £700). Service breakdown (working backwards from most recent): - Years aged 41--45: 5 years x 1.5 weeks x £700 = £5,250 - Years aged 22--40 (remaining 7 years): 7 years x 1 week x £700 = £4,900 Total: £5,250 + £4,900 = £10,150 **Worked example 3 -- young worker** Jamie, age 23, has worked 3 years (1 year before age 22, 2 years after). - 1 year under age 22: 1 x 0.5 x £500 = £250 - 2 years age 22--23: 2 x 1 x £500 = £1,000 Total: £1,250 **Tax treatment** Statutory redundancy pay is tax-free up to £30,000 (as part of the overall termination payment exemption). Most statutory redundancy payments are below £30,000 and therefore completely tax-free. **Enhanced redundancy pay** Many employers pay more than the statutory minimum. Enhanced pay above the statutory amount may be subject to tax if total termination payments exceed £30,000.

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