UK Redundancy Pay: The Complete Guide for 2026

What is statutory redundancy pay?

Statutory redundancy pay is a lump-sum payment your employer is legally required to make when they dismiss you by reason of redundancy, and you have at least 2 years of continuous employment. It is a right set by the Employment Rights Act 1996 (s.135–s.154) and cannot be contracted out of — even if your employment contract says otherwise.

The amount is calculated using a fixed formula based on three things: your age, your length of continuous service (capped at 20 years), and your weekly pay (capped at £751 from 6 April 2026). The maximum statutory payment is therefore £22,530. Many employers pay more (enhanced redundancy pay) — the statutory amount is the legal minimum, not the target.

Who qualifies for redundancy pay?

To receive statutory redundancy pay in the UK, you must:

• Be an employee (not a worker or self-employed contractor)
• Have at least 2 years of continuous employment with the same employer
• Have been dismissed by reason of redundancy
• Not have unreasonably refused a suitable alternative role offered by your employer

Your employer cannot make you redundant and then immediately hire someone else to do the same job — that is not a genuine redundancy and may be unfair dismissal. A genuine redundancy means the business need for your role has diminished or ceased, or the workplace is closing.

How is statutory redundancy pay calculated?

The formula multiplies three factors:

• Service years under age 22: 0.5 week's pay per complete year
• Service years aged 22–40: 1 week's pay per complete year
• Service years aged 41 or over: 1.5 week's pay per complete year

Only the last 20 years of service count. Weekly pay is capped at £751 (2026/27 — reviewed annually each April 6). The maximum payment is therefore 20 years × 1.5 × £751 = £22,530 for service entirely after age 41.

Is redundancy pay taxable?

The first £30,000 of total qualifying termination payments is free of income tax. Statutory redundancy pay counts toward this threshold, as does any enhanced (ex gratia) redundancy pay. The £30,000 exemption applies to the combined total — if you receive £15,000 statutory pay and £20,000 enhanced pay, £5,000 is taxable.

Importantly, notice pay is excluded from the £30,000 exemption. Pay in lieu of notice (PILON) is always fully taxable as earnings and subject to income tax and National Insurance, regardless of whether it is contractual or non-contractual.

What if your employer refuses to pay?

If your employer is insolvent or simply refuses to pay, you have options:

• Employment Tribunal: You have 6 months from the effective date of termination (the date your employment ended) to bring a tribunal claim for unpaid redundancy pay.
• Insolvency Service (National Insurance Fund): If your employer is insolvent, you can apply directly to the government to pay your statutory redundancy entitlement via the Redundant Employees Lump Sum Payments Scheme.
• ACAS early conciliation: Before filing a tribunal claim, you must contact ACAS to attempt early conciliation — this is mandatory and often resolves disputes faster than formal proceedings.

Collective redundancy: when 20 or more people are affected

If your employer proposes to make 20 or more employees redundant at the same establishment within 90 days, additional rules apply:

• 20–99 redundancies: employer must begin collective consultation at least 30 days before the first dismissal
• 100+ redundancies: minimum 45-day consultation period
• The employer must also notify the Insolvency Service via a HR1 form

Failure to collectively consult entitles each affected employee to a protective award of up to 90 days' pay — awarded by the Employment Tribunal.

Redundancy vs dismissal: what is the difference?

Redundancy is a specific type of dismissal defined in the Employment Rights Act 1996 (s.139). A dismissal is a redundancy only if it is caused by:

• The employer ceasing to carry on the business
• The employer ceasing to carry on the business at the place where the employee was employed
• The requirement for employees to carry out a particular kind of work having diminished or ceased

If your employer dismisses you for conduct or performance while calling it a "redundancy," that is likely unfair dismissal — not a genuine redundancy. The selection process must also be fair: employers must not use discriminatory criteria (age, sex, pregnancy) for selection.

Key checklist before accepting redundancy

• Confirm you have been formally placed at risk and given notice of the proposed redundancy
• Check your contract for any enhanced redundancy provisions
• Calculate your statutory entitlement using the official formula
• Ask for the selection criteria in writing and challenge any that seem unfair
• Explore whether suitable alternative roles exist within the organisation
• Consider consulting an employment solicitor if the package seems low or the process unfair
• Do not sign a settlement agreement without independent legal advice (your employer should pay for this)