How exactly is statutory redundancy pay calculated?

Full answer

Statutory redundancy pay uses a specific formula combining three factors: age during each year of service, length of service (capped), and weekly pay (also capped), and understanding how these interact matters for anyone facing redundancy. **The age-banded multiplier** For each full year of continuous service, the multiplier applied depends on your age DURING that particular year of employment, not just your age now: 0.5 week's pay for each full year worked under age 22, 1 week's pay for each full year worked aged 22 to 40, and 1.5 weeks' pay for each full year worked aged 41 or over. **The service cap** Only a maximum of 20 years of continuous service counts towards the calculation, even if you have worked for the employer longer -- any years beyond 20 do not add further to the statutory redundancy pay amount, though an employer's own enhanced scheme may go beyond the statutory minimum. **The weekly pay cap** Your weekly pay for this calculation is also capped at a statutory maximum figure (reviewed and typically increased annually), even if your actual weekly pay is higher -- someone earning well above the cap has their redundancy pay calculated using the CAPPED weekly figure, not their real salary. **Worked example** Someone aged 45 with 22 years of continuous service (capped at 20 years for the calculation) and weekly pay above the statutory cap would have their redundancy pay calculated using the CAPPED weekly figure, working through each of the (capped) 20 years at the multiplier appropriate to their age during that year -- since they were over 41 for the more recent years and younger in earlier years, different years attract different multipliers (0.5, 1, or 1.5 times capped weekly pay), summed together. **Minimum service requirement** Statutory redundancy pay only applies to employees with at least 2 full years of continuous service with the employer; those with less service are not entitled to statutory redundancy pay at all (though may still be entitled to notice pay and any contractual enhancements). **Tax treatment** Genuine statutory (and most contractual) redundancy pay benefits from the £30,000 tax-free termination payment exemption, meaning it is usually paid without Income Tax or National Insurance deducted, up to that combined limit across the whole termination package. **Practical tip** Use the Redundancy Pay calculator with your accurate age, continuous service start date, and weekly pay to get your statutory minimum figure, and separately check your contract or staff handbook for any enhanced (above statutory) redundancy scheme your employer may offer on top.

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