Employees with 2 or more years' continuous service are entitled to statutory redundancy pay when made redundant. The calculation is based on age, length of service, and weekly pay (subject to a cap).
The Formula
- Under 22 — half a week's pay for each complete year of service
- 22 to 40 — one week's pay for each complete year
- 41 and over — one and a half weeks' pay for each complete year
Maximum 20 years' service can be counted.
Current Limits (2024/25)
- Weekly pay cap: £643 (even if the employee earns more)
- Maximum statutory redundancy pay: £19,290 (20 years × 1.5 weeks × £643)
These limits are reviewed annually, usually increasing on 6 April.
Key Points
- Statutory redundancy pay is tax-free up to £30,000
- Service is calculated backwards from the date of dismissal
- Only complete years of service count
- Employers can offer enhanced redundancy pay above the statutory minimum
- Employees who unreasonably refuse a suitable alternative employment offer may lose their right to statutory redundancy pay
Claiming Redundancy Pay
If the employer doesn't pay, the employee can apply to an employment tribunal within 6 months of the effective date of termination. If the employer is insolvent, the Redundancy Payments Service (part of the Insolvency Service) will pay from the National Insurance Fund.
Our redundancy management service ensures the process is handled correctly. Get help.