🇬🇧 UK · Employment Law · Updated 2026-06-27
Statutory vs enhanced redundancy pay: what are you owed?
Every eligible employee is entitled to statutory redundancy pay — a minimum set by Parliament and updated annually. Many employers, particularly larger organisations, pay more than this through contractual or discretionary enhanced redundancy schemes. Knowing which applies to you can make a substantial difference to what you receive.
Key differences at a glance
| Aspect | Statutory redundancy pay | Enhanced redundancy pay |
|---|---|---|
| Source | Employment Rights Act 1996 (ERA 1996 s.162) | Employment contract, collective agreement, staff handbook, or employer discretion |
| Qualifying service | 2 years' continuous employment | Often 1 year or from day one (depends on employer scheme) |
| Weekly pay cap (2026/27) | £751 per week maximum | Uncapped — employer may use actual salary or a higher cap |
| Maximum years counted | 20 years | Often higher — some schemes count all years of service |
| Age multiplier | Under 22: 0.5 week per year; 22–40: 1 week per year; 41+: 1.5 weeks per year | Varies — many employers use a flat 1 or 1.5 week per year regardless of age |
| Maximum statutory pay (2026/27) | £22,530 (20 years × £751 × 1.5 for 41+ age bracket) | No upper limit — can be significantly higher |
| Tax treatment | First £30,000 of total termination payment is tax-free | First £30,000 of total termination payment is tax-free (statutory + enhanced combined) |
| If employer refuses to pay | Can claim at Employment Tribunal within 6 months of termination | Can claim breach of contract at Employment Tribunal or county court |
The bottom line
Always check your employment contract, any staff handbooks, and applicable collective agreements before accepting a redundancy offer. If your contract or handbook specifies an enhanced scheme, your employer is contractually bound to apply it — paying only the statutory minimum when a higher scheme is in place is a breach of contract. Even where a scheme is described as 'discretionary', if it has been applied consistently, employees may have a legitimate expectation that it will apply to them.
Redundancy pay calculator
Calculate →Frequently asked questions
How is statutory redundancy pay calculated?
Statutory redundancy pay = number of complete years of continuous employment (up to 20) × weekly pay (capped at £751 from 6 April 2026) × age multiplier (0.5 for under-22 service years, 1 for 22–40 service years, 1.5 for 41+ service years). The maximum is £22,530. Use the government's redundancy pay calculator or ours to get the exact figure.
What is the £30,000 tax-free threshold?
The first £30,000 of your total termination payment is exempt from income tax and National Insurance contributions. This threshold applies to the combination of statutory redundancy pay, any enhanced redundancy pay, and any ex gratia payments. Notice pay (PILON) does not benefit from this exemption — it is fully taxable. If your total redundancy and termination payment exceeds £30,000, the excess is subject to income tax.
Can my employer cut my enhanced redundancy scheme without telling me?
If the enhanced scheme is a contractual term (in your contract or incorporated by a collective agreement), your employer cannot remove it without your consent and following a proper process — doing so is a breach of contract. If it is a genuinely discretionary scheme that has never been committed to contractually, your employer has more flexibility, but consistent past practice can create a reasonable expectation that makes removal legally risky.
Does enhanced redundancy pay affect my statutory entitlement?
No. Enhanced pay is paid in addition to, and separately from, the statutory calculation. If your employer's scheme pays 2 weeks per year of service on actual salary, you are also owed the statutory calculation as a minimum. In practice, most enhanced schemes are expressed as a multiple of or substitute for statutory pay — your contract will specify which.
What if I was only employed for 18 months — am I owed anything?
Statutory redundancy pay requires 2 years' continuous service, so you would not qualify for the statutory payment. However, if your employer has an enhanced scheme with a shorter qualifying period (some start from day one or after 1 year), check your contract and handbook. You are also entitled to your notice period (or PILON) regardless of length of service.