Comparison · Employment · 2026/27
Statutory vs Contractual Redundancy Pay UK 2026/27
Every qualifying employee is entitled to statutory redundancy pay, calculated by age and service and capped at £751/week for 2026/27. Some employers offer enhanced (contractual) redundancy pay on top or instead, using a more generous formula. This guide compares both and explains the £30,000 tax-free threshold.
TL;DR — 30-Second Summary
- • Statutory formula: 0.5/1/1.5 weeks per year by age band, capped at £751/week, max 20 years
- • Statutory maximum: £22,530 (20 × 1.5 × £751) for someone 41+ throughout service
- • Enhanced/contractual: employer-specific, may remove the cap or add more weeks per year
- • Tax-free threshold: first £30,000 of a genuine payment, combining both elements
- • Not covered by £30,000: PILON, accrued holiday pay and contractual bonuses — taxed as normal
Side-by-Side
| Feature | Statutory redundancy pay | Contractual (enhanced) redundancy pay |
|---|---|---|
| Weekly pay cap (2026/27) | £751 | Often uncapped — actual salary used |
| Weeks per year of service | 0.5 / 1 / 1.5 by age band | Employer-set, e.g. flat 2 or 3 weeks |
| Years counted | Maximum 20 years | May remove the 20-year cap |
| Legally required? | Yes, with 2+ years' service | No — only if contractually promised |
Which Should You Check?
Always check your contract, staff handbook and any established company practice for an enhanced scheme before assuming only the statutory minimum applies — many larger and longer-established employers offer more generous terms. Use the redundancy pay calculator to check your statutory floor, then compare any offer against it, and see settlement agreement vs resignation if you are being offered a settlement alongside redundancy.