Statutory Redundancy Pay

The maximum statutory redundancy payment in 2026-27 is therefore £22,530 (1.5 × £751 × 20 years). The employer must give a written statement showing how the payment was calculated. Payment must be made on or shortly after the dismissal date. Statutory redundancy is tax-free under section 401 ITEPA 2003 up to £30,000. Some employers offer contractual redundancy pay higher than statutory. If the employer is insolvent, the National Insurance Fund pays statutory redundancy under section 166 ERA.

In practice, the calculation is mechanical once you have three numbers: your age across each year of service, your complete years of continuous service counting back from the dismissal date, and your gross weekly pay capped at the statutory maximum. Work backwards from the end date, allocating each year to the age band you were in during that year. Only complete years count, so someone dismissed a fortnight before an anniversary loses that whole year — which is why the exact termination date matters, and why notice worked or paid in lieu can change the figure.

Worked example: Ian is 43 with 11 complete years of service and gross weekly pay of £900. Because his actual pay exceeds the statutory cap, the calculation uses the capped figure of £751. Two of his years were worked after he turned 41, so those attract 1.5 weeks each; the other nine attract one week each. That is 3 plus 9, giving 12 weeks at £751, or £9,012. His employer must give him a written statement showing the workings. The payment is tax-free up to £30,000, but any pay in lieu of notice and accrued holiday are taxable as normal earnings and should be shown separately on the final payslip.

The misconceptions cost people money. Statutory redundancy pay is the floor, not the offer — many contracts and policies provide enhanced terms, so check the staff handbook before accepting. Refusing an offer of suitable alternative employment without good reason can forfeit the payment entirely, while a four-week statutory trial period lets you try a new role without losing the right. Being made redundant does not stop you also claiming unfair dismissal if the selection or consultation was flawed. And if the employer simply refuses to pay, you claim through the employment tribunal within six months, which is longer than the usual three-month limit but still easy to miss.

Statutory redundancy pay comes from the Employment Rights Act 1996, sits alongside a potential unfair dismissal claim, and triggers collective consultation duties under TULRCA where 20 or more roles are at risk. Read our guides to redundancy and calculating redundancy pay before you sign anything.