Redundancy Pay Calculation

Statutory redundancy pay is calculated using a formula based on three factors:

1. Your age during each year of service
2. Your complete years of continuous service (up to a maximum of 20 years)
3. Your weekly pay, capped at the statutory weekly pay cap (reviewed each April)

The age-based multipliers are:

• Each year of service aged 41 or over: 1.5 weeks' pay
• Each year of service aged 22 to 40: 1 week's pay
• Each year of service aged under 22: 0.5 weeks' pay

The government's redundancy pay calculator on GOV.UK will calculate your entitlement automatically once you enter your date of birth, start date, end date, and weekly pay. From 6 April 2026 the weekly pay cap is £751, so the maximum statutory redundancy pay is 30 weeks × the cap (which works out to £22,530 for a redundancy on or after 6 April 2026).

For redundancy pay purposes, "a week's pay" means your gross regular weekly pay, subject to the cap. How it is calculated depends on how you are paid:

• Fixed hours and pay: Your regular gross weekly salary (or daily rate × days per week).
• No fixed hours (variable pay): Average weekly pay over the 12 weeks immediately before the calculation date (the date you are given notice). Weeks without pay are excluded and earlier weeks are used instead.
• Shift workers with irregular hours: Similar average over 12 weeks.

The week's pay figure is then capped at the statutory maximum, which is reviewed each April. For redundancies on or after 6 April 2026 the cap is £751 per week. The cap that applies is the one in force on the date your employment ends, not on the date your notice was given.

Your employer may offer enhanced redundancy pay above the statutory minimum — either through your employment contract, a collective agreement, or discretionary policy. If a contractual redundancy scheme exists, your employer must honour it. If they offer a discretionary enhanced amount in exchange for signing a settlement agreement, you are under no obligation to accept their first offer.

If you believe you have been underpaid statutory redundancy pay, you can:

• Write to your employer requesting a breakdown of the calculation
• Use the GOV.UK redundancy pay calculator to check the figure independently
• Bring a claim in the Employment Tribunal within six months of the date your employment ended

If your employer is insolvent and cannot pay, apply to the Redundancy Payments Service (administered by the Insolvency Service) for payment from the National Insurance Fund. The RPS can pay statutory redundancy pay, arrears of pay, notice pay, and accrued holiday pay up to statutory limits.

Many redundancy situations involve a negotiated exit package rather than just statutory redundancy pay. Where your employer offers you a settlement agreement, you are not obliged to accept the first offer — and in most cases there is room to negotiate.

Points that are commonly negotiable in a redundancy settlement include:

• Enhanced redundancy pay: Your employer may offer more than the statutory minimum, either as a matter of contractual policy or as an ex gratia (non-contractual) payment. If you have strong tenure, a good track record, or potential claims (such as unfair selection), this can give you negotiating leverage.
• Notice pay: If your contract requires working notice, you may be able to negotiate a PILON (payment in lieu of notice) to leave sooner, or negotiate enhanced pay during a garden leave period.
• Reference wording: Agree a written reference in advance and attach it to the settlement agreement — this avoids uncertainty after you leave.
• Restrictive covenant release: If your contract contains post-termination restrictions, negotiate their reduction or waiver as part of the settlement, particularly if the employer is not paying significant enhanced amounts.
• Out-placement support: Some employers offer career transition or outplacement services as part of the exit package, particularly for longer-serving employees.

For a settlement agreement to be legally valid and binding, you must receive independent legal advice from a qualified adviser — usually a solicitor — about the terms and their effect. This is a strict legal requirement: a settlement agreement without independent advice is void and cannot waive your statutory employment claims. The employer typically agrees to contribute to the cost of this advice. Do not sign until you have received and understood the advice.

Where you believe the redundancy process has been unfair — for example, because the selection criteria were not applied properly, you were not given adequate warning or consultation, or the real reason for your dismissal was not redundancy — you have the option of both negotiating a settlement and preserving your right to bring a tribunal claim until the settlement is signed. During Acas Early Conciliation, your employer cannot prevent you from lodging a claim — the conciliation period pauses the time limit. If negotiations break down, you can proceed to tribunal. This dual-track approach is common in redundancy disputes and gives you the strongest negotiating position.

For employees with significant pension benefits — particularly those in defined benefit or final salary pension schemes — the impact of early termination on pension accrual can be a major element of the overall redundancy package. It is worth obtaining a pension projection or speaking to a financial adviser to understand the long-term financial effect before agreeing a settlement. Employers are sometimes willing to make an enhanced pension contribution or extend membership for an additional period as part of a settlement if asked. Additionally, any part of a redundancy payment up to £30,000 is free of income tax — but payments in lieu of notice (PILON) are taxable as earnings. Structuring the settlement correctly to maximise the tax-free element is another area where independent legal and financial advice adds real value beyond simply reviewing the settlement agreement's legal terms. Most employment solicitors who specialise in settlement agreements work on a fixed-fee basis for this type of advice, making the cost predictable and often entirely covered by the employer's agreed contribution.