Redundancy Pay: What You're Actually Entitled To

Being told your job is at risk of redundancy is stressful enough without also having to work out whether the figure your employer's given you is actually correct. Redundancy pay follows a strict legal formula — it isn't a judgement call, and it isn't something your employer gets to decide on the day. Here's exactly how it works, what you're owed, and where people commonly get shortchanged.

What redundancy actually means

Redundancy is a specific legal reason for dismissal — it applies when a job genuinely stops being needed, not when an employer simply wants someone gone. Common genuine reasons include the business closing, a particular site closing, or the need for a role reducing or disappearing entirely.

If the role still exists but your employer just wants a different person doing it, that isn't redundancy — dismissing someone and calling it redundancy when the job hasn't actually gone can amount to unfair dismissal, which is a separate claim entirely.

How much you're entitled to

Statutory redundancy pay is calculated using your age during each year of service, your length of service, and your weekly pay — all fed into a fixed formula:

• Under 22: 0.5 week's pay for each full year of service
• 22 to 40: 1 week's pay for each full year of service
• 41 and over: 1.5 weeks' pay for each full year of service

Only complete years of service count, and service is capped at a maximum of 20 years, even if you've worked there longer.

The weekly pay cap. Your weekly pay for this calculation isn't necessarily your real weekly pay — it's capped by law. From 6 April 2026, that cap is £751 per week, even if you actually earn more. If your real average weekly pay (calculated over the 12 weeks before you received your redundancy notice) is below £751, the calculation uses your real figure instead.

The maximum you can get. With the cap at £751 and the maximum service and age multiplier both applied (20 years, all in the 41+ band), the absolute statutory maximum is 20 years × 1.5 × £751 = £22,530. In practice, very few people hit this maximum — it requires two decades of continuous service entirely within the 41-and-over age band. Most people's statutory entitlement is considerably lower, and that's normal.

A worked example

Say you're 35, with 8 years of continuous service, and your average weekly pay over the last 12 weeks was £550 (below the cap, so the real figure applies):

• All 8 years fall within the 22–40 band, so each year is worth 1 week's pay
• 8 years × 1 week = 8 weeks
• 8 weeks × £550 = £4,400

If your weekly pay had instead been £900, the calculation would still use the £751 cap, not £900 — giving 8 × £751 = £6,008 instead.

Is redundancy pay taxable?

Statutory redundancy pay is tax-free up to £30,000. This threshold covers your total termination payment, not just the statutory redundancy element — so if your employer's also paying notice pay in lieu (PILON) or an enhanced/ex-gratia payment on top, they all count toward the same £30,000 tax-free limit together. Anything above £30,000 in total is taxed as normal income. Notice pay and any outstanding holiday pay are treated as normal earnings and are taxable regardless of the £30,000 threshold — only the redundancy element itself benefits from it.

Enhanced redundancy pay

The figures above are the legal minimum — your employer cannot pay less than this if you qualify, but many employers offer more, known as enhanced or contractual redundancy pay. This is common where it's written into your contract or a collective agreement, in which case your employer is legally bound to honour it, not just the statutory minimum. If your contract or staff handbook mentions enhanced redundancy terms, check it — you may be owed more than the basic statutory figure.

Who qualifies

To be entitled to statutory redundancy pay, you generally need at least 2 years of continuous service with your employer, and to be classed as an employee rather than a genuinely self-employed contractor (though this is sometimes disputed and worth checking properly if you're on a "self-employed" contract but work like an employee).

You won't qualify if you're dismissed for misconduct instead, if you unreasonably refuse a genuinely suitable alternative role your employer offers, or if you resign before being formally made redundant.

Notice pay is separate from redundancy pay

Redundancy pay and notice pay are two different entitlements, both owed on top of each other — don't confuse the two. You're entitled to a statutory minimum notice period based on length of service, or pay in lieu of notice if your employer ends your employment immediately instead. If your contract specifies a longer notice period than the statutory minimum, you're entitled to whichever is longer.

Consultation — your employer has to follow a fair process

Even a genuine redundancy has to be handled fairly. Your employer should explain clearly why the role is at risk, consult with you individually (and collectively, with employee representatives, if 20 or more redundancies are proposed at one establishment within 90 days), use fair and objective selection criteria if choosing between employees in similar roles, and consider suitable alternative employment before dismissing you.

Skipping proper consultation, or using unfair selection criteria, can turn what should be a straightforward redundancy into an unfair dismissal claim — even if the underlying redundancy itself was genuine.

If your employer can't pay

If your employer has gone insolvent and genuinely cannot pay your redundancy entitlement, you're not simply out of luck — you may be able to claim it directly from the National Insurance Fund via the government's redundancy payments service, rather than relying on the insolvent employer to pay you personally.

What to do next

If you've received a redundancy notice, a few practical steps are worth taking straight away:

• Check the figure you've been given against the formula above — mistakes and outdated caps do happen, especially around April when the rates change
• Check your contract for any enhanced redundancy terms you might be entitled to on top of the statutory minimum
• Register for Universal Credit if there's likely to be a gap before your next income — you can normally apply as soon as you know your job is ending, not just after your last day
• Update your CV and start job searching early — you're generally entitled to reasonable time off to look for new work or arrange training during your notice period, if you've been continuously employed for two years or more

You have 6 months from the date your job ends to claim statutory redundancy pay if your employer hasn't paid it, so don't let this slip if there's a dispute.

What this means practically

Our free Employee Rights Checker can walk through your specific redundancy situation, including whether the process followed was fair. Our letter templates include a template for querying an incorrect redundancy calculation, and if things aren't adding up on the process side, our Disciplinary & Dismissal Checker covers unfair dismissal specifically.