UK Redundancy Pay: Complete Guide 2026

Who qualifies for statutory redundancy pay?

You qualify if you meet all four of these conditions, set out in the Employment Rights Act 1996:

• Employee status — you must be an employee, not a worker or self-employed contractor.
• Two years' continuous service — you must have worked for the same employer without a break for at least two years.
• Genuine redundancy — your role must have ceased or diminished, not merely your employment relationship. Being fired for misconduct does not count.
• Not excluded — certain groups are excluded, including employees on fixed-term contracts where redundancy pay has been agreed to waive the right, domestic servants employed by close relatives, and employees of the Crown in certain capacities.

Agency workers, zero-hours contract workers, and the genuinely self-employed do not have statutory redundancy rights, though they may have rights under their individual contracts. ACAS runs a free helpline (0300 123 1100) if you are unsure of your employment status.

How statutory redundancy pay is calculated

The formula uses three variables: your age, your length of service, and your weekly pay — each subject to statutory caps.

Weekly pay cap (2026/27): £751. If your normal weekly pay is more than £751, only £751 is used in the calculation.

Service cap: 20 years. Even if you have worked for your employer for 30 years, only the most recent 20 count.

Maximum payment: £22,530 (20 years × 1.5 weeks × £751). This represents someone aged 61+ who has worked for the same employer for 20+ years earning at least £751 per week.

Worked example

Sarah is 38 years old. She has worked for her employer for 9 years and earns £600 per week (below the £751 cap, so her actual pay is used).

• All 9 years of service were between ages 29 and 38, so the band is 22–40 = 1 week per year.
• 9 years × 1 week × £600 = £5,400 statutory redundancy pay.

If Sarah had started at age 20, three of those nine years would fall under the under-22 band (½ week) and six under the 22–40 band (1 week): (3 × ½ × £600) + (6 × 1 × £600) = £900 + £3,600 = £4,500.

Is redundancy pay taxable?

Statutory redundancy pay is compensation, not earnings, and the first £30,000 of a genuine redundancy payment is exempt from income tax and National Insurance. This threshold covers the whole redundancy package — statutory pay, any enhanced redundancy pay, and any ex-gratia payment.

Amounts above £30,000 are taxable at your marginal income tax rate and subject to employer-only NIC (Class 1A) but not employee NIC.

Importantly, payment in lieu of notice (PILON) is always taxable regardless of how it is labelled, following the post-April 2018 HMRC rules. It is treated as earnings and subject to full PAYE and NIC.

When must your employer pay you?

Statutory redundancy pay must be paid on or before your leaving date, or within a reasonable time thereafter. Your employer must give you a written statement showing how the amount was calculated.

If your employer is placing you on notice, you should receive a written notice of redundancy — oral notice is valid in law but creates evidential problems. Your statutory redundancy pay is calculated based on your last day of employment (your "relevant date"), not the date you received notice.

Enhanced redundancy pay

Many employers — particularly in the public sector, financial services, and professional services — pay more than the statutory minimum. Common enhancements include:

• Using your actual weekly pay rather than the statutory cap
• Counting more than 20 years of service
• Paying a higher multiplier per year (e.g. 2 weeks per year instead of 1)
• Applying a flat additional payment on top of the statutory sum

The terms of any enhanced scheme should appear in your contract of employment, collective agreement, or company handbook. If your employer has a written policy that it has consistently applied, you can usually enforce it even if it is not explicitly in your contract.

What if your employer refuses to pay?

If your employer refuses to pay statutory redundancy pay or you believe you have been underpaid, you have several routes:

1. Write to your employer formally claiming the amount you believe you are owed. Keep a copy.
2. Contact ACAS (0300 123 1100 or acas.org.uk) for free early conciliation. This is a prerequisite before making a tribunal claim.
3. Employment tribunal claim — you have three months from the relevant date (your leaving date) to make a claim. The tribunal can order payment of the full statutory amount.
4. Insolvent employers — if your employer has gone into administration or liquidation, you can claim directly from the Redundancy Payments Service (part of the Insolvency Service), which is funded by the National Insurance Fund.

Frequently asked questions