Redundancy pay

Statutory redundancy pay is a number of weeks' pay, and how many weeks depends on the age you were during each year you served – not the age you are now.

The age bands are historical, and that is the whole difficulty

Someone made redundant at 45 after 20 years did not serve 20 years at the top rate. They served four of them at 41 or over and sixteen in the middle band. Multiplying total service by the band for your current age over-pays an older worker and under-pays a younger one, and it is what almost every simplified version does.

The rates are half a week's pay for each full year served under 22, one week for each year from 22 to 40, and one and a half weeks for each year at 41 or over.

Two separate caps

A salary divided by 52 is an approximation

Statutory redundancy is worked out on a week’s pay, which the law defines as the average of the 12 weeks before your redundancy notice. If your pay is the same every month, dividing your salary by 52 lands on the same figure and the answer here is exact. If it is not — overtime, commission, shift premiums, bonuses, or a period of sick or reduced pay in those 12 weeks — the real week’s pay is different from the one worked out here, and it is the 12-week average that counts.

In practice it often makes no difference at all, because a week’s pay is capped before the weeks are counted, and anyone above the cap gets the cap whichever way the figure was reached.

Weekly pay is capped before the weeks are counted, and the total is capped again afterwards. They are different constraints: a long-serving worker on modest pay can be caught by neither, by one, or by both. Anyone earning above the weekly cap is being paid on the cap rather than on their salary, which is often the biggest surprise on this page.

Service is capped at the best years

Only the most recent twenty years count. That is the favourable way round – those are the years most likely to fall in the top band – but it does mean thirty years of service and twenty years of service can come to exactly the same money.

You need two years to get anything

Under two years' service there is no statutory redundancy pay at all. Contractual redundancy pay is a separate matter and can be more generous, or can exist where the statutory scheme gives nothing.

Tax

Statutory redundancy pay is tax-free, and it counts toward the £30,000 exemption that covers termination payments generally. So a statutory payment plus a contractual one can be taxable overall even though the statutory part never is.

What this does not cover

Contractual or enhanced redundancy schemes, which are whatever the contract says. Notice pay and pay in lieu of notice, which are taxable and separate. Holiday accrued but not taken. Payments from the Insolvency Service where an employer cannot pay. Northern Ireland, which has its own scheme with its own figures. And whether the redundancy is lawful, which is an employment law question rather than an arithmetic one.

Where these figures come from

Every figure above is read from a dated rate file rather than written into the page, and each one is checked against the gov.uk page it came from. How these numbers are kept right sets out the whole process.

Rates not yet checked against their source Take-home pay calculator