Redundancy pay is calculated by a formula — your age, years of service, and pay all determine the figure. The government caps the maximum, but it is still meaningful money.
2025/26 Statutory Rates
| Rate | 2025/26 |
|---|---|
| Weekly pay cap | £643 |
| Maximum years counted | 20 |
| Maximum payment | £19,290 |
The Redundancy Pay Formula
For each complete year of continuous employment:
| Your age during that year | Weeks’ pay per year |
|---|---|
| Under 22 | 0.5 weeks |
| 22–40 | 1 week |
| 41 or over | 1.5 weeks |
Example calculation:
- Age 45, 12 years’ service, weekly pay £800 (capped at £643)
- Years 34–40: 7 years × 1 week = 7 weeks
- Years 41–45: 5 years × 1.5 weeks = 7.5 weeks
- Total: 14.5 weeks × £643 = £9,323.50
Use the GOV.UK redundancy pay calculator for your exact figure.
Qualifying Conditions
To receive statutory redundancy pay you must:
- Be an employee (not just a worker)
- Have at least 2 years’ continuous service
- Have been dismissed by reason of genuine redundancy
- Not have unreasonably refused a suitable alternative
Tax and Payment
- First £30,000 of any redundancy payment is free of income tax and NI
- Statutory redundancy pay is always within the £30,000 threshold
- Must be paid on your last day of employment or with your final pay
If Your Employer Is Insolvent
If your employer cannot pay, claim from the National Insurance Fund via the Insolvency Service (GOV.UK). The NIF pays statutory redundancy pay (capped at statutory limits), up to 8 weeks’ unpaid wages (capped at £643/week), notice pay, and up to 6 weeks’ outstanding holiday pay.
Enhanced Redundancy Pay
Statutory redundancy pay is the minimum — many employers offer enhanced redundancy pay above this level as part of their employment contract or redundancy policy. Enhanced pay may be:
- A higher weekly rate (e.g. 2 weeks’ pay per year of service)
- No cap on the weekly pay (no £643 limit)
- Inclusive of ex-gratia payments
Check your employment contract, staff handbook, and any custom or practice at your employer. If colleagues who were made redundant previously received enhanced terms, you may have an expectation of the same. Enhanced redundancy pay above £30,000 may be taxable — the first £30,000 of redundancy payments is exempt from income tax and NI.
Redundancy and Benefits
If you receive statutory redundancy pay:
- It does not count as income for Universal Credit or Tax Credits immediately — it is treated as capital
- Capital over £6,000 reduces UC (£1 reduction per £250 above £6,000); over £16,000 disqualifies you from UC
- Redundancy pay may delay your entitlement to contribution-based Jobseeker’s Allowance if HMRC treats it as notional earnings
If your redundancy pay (excluding the exempt £30,000) pushes you into a higher tax band for the year, consider pension contributions to reduce the taxable amount.