Redundancy Pay Calculator

How Statutory Redundancy Pay Is Calculated

Statutory redundancy pay is calculated using age-based multipliers applied to each complete year of continuous service, working backwards from the dismissal date. The formula uses three bands based on the employee's age during each year of service.

Weekly pay is capped at £719 (from April 2025). Only complete years count, and the maximum number of years that can be included is 20. This means the maximum statutory redundancy pay is £21,570 (30 weeks at the capped rate). The calculation works backwards from the dismissal date, so the most recent years of service are counted first.

Who Qualifies?

To qualify for statutory redundancy pay, an employee must meet all of the following criteria:

• At least 2 years' continuous service with the same employer (or an associated employer)
• The dismissal must be genuinely by reason of redundancy: the business is closing, the workplace is closing, or there is a reduced need for employees to carry out work of a particular kind
• The employee has not unreasonably refused a suitable offer of alternative employment

These rules are set out in the Employment Rights Act 1996, Part XI. Employees who are dismissed for misconduct during the notice period may lose their right to a redundancy payment, but only if the employer follows the correct procedure.

Current Rates (2025/26)

The statutory redundancy pay limits are reviewed each year and typically increase in April. The current rates effective from 6 April 2025 are:

Enhanced Redundancy Pay

Many employers choose to offer more than the statutory minimum. Enhanced redundancy packages are common in larger organisations and are often set out in the company's redundancy policy or in individual contracts of employment. Common enhancements include using actual weekly pay instead of the capped rate, applying higher multipliers (for example, two weeks per year of service), or adding a lump sum on top of the statutory calculation.

The tax treatment of enhanced redundancy pay follows the rules in ITEPA 2003, s.401. The first £30,000 of any redundancy payment (including both statutory and enhanced elements) is tax-free. Any amount above £30,000 is subject to income tax and employer National Insurance contributions. It is important to note that payments in lieu of notice (PILON) are always taxable and do not form part of the £30,000 exemption unless the employment contract has no PILON clause.

If you are offering enhanced terms, it is good practice to set them out clearly in writing and apply them consistently to avoid claims of unfair treatment or discrimination.

Related Resources

• How Redundancy Pay Is Calculated in the UK
• Managing a Redundancy Process
• Employee Consultation Process
• Redundancy Support