If you're made redundant after at least two full years of continuous employment, your employer must pay you statutory redundancy pay by law — this is separate from and in addition to your notice pay, holiday pay, or any final salary owed. The amount is based on three things: your age, your length of service, and your weekly pay, each capped by law.
The calculation works backwards from your last working day, counting one entitlement for each full year worked, using the multiplier that applied to your age during that particular year of service.
| Age during that year of service | Entitlement per full year |
|---|---|
| Under 22 | 0.5 week's pay |
| 22 to 40 | 1 week's pay |
| 41 and over | 1.5 weeks' pay |
Two important caps apply: length of service is capped at 20 years (even if you worked longer), and your weekly pay is capped at a statutory maximum, currently £700 per week regardless of how much you actually earn.
Counting backwards, this employee was aged 36-45 during their 10 years of service. The first 5 years (ages 36-40) qualify for 1 week's pay each = 5 weeks. The last 5 years (ages 41-45) qualify for 1.5 weeks' pay each = 7.5 weeks. Total: 12.5 weeks at £600/week (below the £700 cap) = £7,500.
The first £30,000 of a genuine termination payment — including statutory and most enhanced redundancy pay — is free of both Income Tax and National Insurance. Only the portion above £30,000 is taxed at your normal Income Tax rate, and employer (not employee) National Insurance becomes due on the excess too.
Many employers, especially larger organisations, offer enhanced redundancy terms — sometimes a fixed number of weeks per year of service with no age banding, or a multiple of statutory pay. These enhanced terms come from your contract or company policy, not from the law, so check your employee handbook or ask HR for the exact enhanced terms that apply to you.