How to calculate statutory redundancy pay in 2026
Statutory redundancy pay is calculated using your age during each completed year of service, your length of continuous employment and your gross weekly pay. Under GOV.UK rules, only the most recent 20 completed years can count.
For redundancies taking effect on or after 6 April 2026 in Great Britain, the Employment Rights (Increase of Limits) Order 2026 sets the statutory weekly-pay ceiling at £751. This produces a maximum statutory redundancy payment of £22,530.
| Age during each year of service | Statutory entitlement |
|---|---|
| Under 22 | 0.5 week's pay for each completed year |
| Age 22 to 40 | 1 week's pay for each completed year |
| Age 41 or over | 1.5 weeks' pay for each completed year |
These multipliers are specified by GOV.UK. Because each year is assessed at the age you were during that year, you should not apply your current age to your entire employment history.
Important: The £751 ceiling applies to the statutory calculation, not necessarily to contractual or enhanced redundancy schemes. Northern Ireland has separate employment legislation and limits, so employees there should use nidirect guidance.
Worked redundancy calculator example
Consider an employee aged 45 when made redundant, with 10 completed years of continuous service and gross weekly earnings above the statutory ceiling. Their calculation uses the £751 weekly cap applying from 6 April 2026, as set by the Employment Rights (Increase of Limits) Order 2026.
| Service period | Age band | Weeks awarded | Calculation |
|---|---|---|---|
| First 5 completed years | Age 35 to 39 | 5 | 5 × £751 = £3,755 |
| Next completed year | Age 40 | 1 | 1 × £751 = £751 |
| Final 4 completed years | Age 41 to 44 | 6 | 4 × 1.5 × £751 = £4,506 |
| Estimated statutory payment | — | 12 | £9,012 |
This example assumes the employee has not already reached age 45 before completing the final service year. Exact results depend on employment dates, date of birth and the legally relevant redundancy date.
Your employer may offer enhanced pay based on salary, grade or longer service. Check the employment contract, staff handbook, collective agreement and any written redundancy policy before treating the statutory figure as your final entitlement.
Who qualifies and which date controls the calculation
GOV.UK says employees normally need at least 2 years of continuous employment with their employer to qualify for statutory redundancy pay. Workers who are not legally classed as employees, some former public-office holders and people who unreasonably refuse suitable alternative work may not qualify.
The applicable weekly cap is generally determined by the date employment ends, not when consultation begins or when the employer announces redundancies. If notice is not properly given, the statutory calculation may use the date employment would have ended had the correct statutory notice been provided.
- Use completed years only; part-years do not increase statutory redundancy pay.
- Base weekly pay on the GOV.UK rules for the relevant calculation date, including special treatment where earnings vary.
- Keep payslips, employment contracts, start-date evidence and the redundancy letter.
- Ask for the employer's calculation in writing and compare each service year against the correct age band.
Practical check: Redundancy pay, notice pay, holiday pay and unpaid wages are separate items. Request an itemised final statement so that a correct redundancy figure does not conceal an error elsewhere.
Tax, notice pay and employer insolvency
HMRC states that qualifying statutory or enhanced redundancy payments are usually tax-free up to a combined £30,000. Amounts above that threshold are normally subject to Income Tax, while employer National Insurance may also apply to the excess under HMRC rules.
Holiday pay, wages, bonuses and payments for working your notice are earnings and are normally taxable through PAYE. HMRC's post-employment notice pay rules can also make part of a termination package taxable where employment ends without the employee working their full notice.
If the employer is insolvent, eligible employees can apply to the government's Redundancy Payments Service for certain unpaid sums. GOV.UK says statutory limits and eligibility rules apply, so the service may not reproduce every element of an enhanced company package.
Warning: Do not assume the first £30,000 of every final payment is tax-free. HMRC distinguishes genuine termination compensation from salary, holiday pay and notice-related earnings.
If job loss leaves immediate bills uncovered, review emergency cash options and obtain regulated or free debt guidance before using high-cost credit.
Benefits and bill support after redundancy
A redundancy payment can affect means-tested support because money retained after receipt may be treated as capital. DWP rules for Universal Credit generally reduce entitlement where household capital exceeds £6,000, while capital above £16,000 normally prevents entitlement; these thresholds remain applicable in 2026/27 according to GOV.UK.
DWP may treat money deliberately given away or converted to secure more benefit as notional capital under its deprivation-of-capital rules. Reasonable spending on debts or necessary goods is not automatically deprivation, but decisions depend on purpose and individual circumstances.
Run a full benefits entitlement check using your changed earnings, savings and household details. Universal Credit can include help with housing costs, while Council Tax Reduction is administered separately by local authorities and requires its own application through Council Tax Support guidance.
- Check your final salary, accrued holiday and notice payment before building a budget.
- Tell DWP promptly about changes affecting an existing Universal Credit claim.
- Contact your council about local welfare assistance and Council Tax Reduction.
- Use SupportFund.co.uk to identify emergency support and practical ways to reduce household bills.
Rates and rules can change: confirm current redundancy limits, tax treatment and benefit thresholds on GOV.UK before making financial or employment decisions.