Calculating statutory redundancy pay

Your statutory redundancy payment depends on three key factors: your length of continuous employment, your age during the employment period, and your weekly pay (subject to statutory caps).

Length of service

Continuous employment means working for the same employer without significant breaks. Only complete years of service count toward your redundancy pay calculation, and the maximum length of service that can be considered is 20 years.

Age-related multipliers

The calculation uses different multipliers based on your age:

• For each year of employment when you were under 22, you receive half a week’s pay
• For each year of employment when you were 22-40, you receive one week’s pay
• For each year of employment when you were 41 or older, you receive one and a half weeks’ pay

Weekly pay calculations

Your weekly pay is capped at a statutory limit (currently £700 as of April 2024 in England and Wales). This will rise again in April 2025.

If you earn more than this amount, the excess won’t be included in your statutory redundancy calculation. For variable pay, an average of your earnings over the previous 12 weeks is used.

Eligibility requirements

To qualify for statutory redundancy pay, you must:

• Have worked continuously for your employer for at least two years
• Be legally classed as an employee (not self-employed or a contractor)
• Have been dismissed due to redundancy

Your employment status significantly affects your eligibility. Workers on zero-hours contracts or agency workers may have different rights, and it’s important to understand your specific situation.

Impact of different situations

Voluntary redundancy doesn’t affect your right to statutory redundancy pay – you’re still entitled to it even if you volunteer for redundancy. However, if you’re on a fixed-term contract that naturally expires, this usually wouldn’t qualify as redundancy unless the contract was terminated early due to redundancy.

If your employer becomes insolvent, you can claim your redundancy pay from the government’s Redundancy Payments Service rather than your employer.

Payment process and taxation

Your employer should pay your redundancy pay when your employment ends or soon after. If there’s a delay, you should first raise this with your employer. If payment is still not forthcoming, you can make an Employment Tribunal claim.

Tax considerations

Statutory redundancy pay up to £30,000 is tax-free. However, other payments you receive as part of your redundancy package, such as payment in lieu of notice or holiday pay, are taxable as normal income. It’s important to understand which elements of your redundancy package are taxable to avoid unexpected tax bills.

Employer responsibilities and your rights

Your employer must provide written information about how your redundancy payment was calculated. They should also give you appropriate notice of redundancy, which varies depending on your length of service:

• At least one week’s notice if employed between one month and two years
• One week’s notice for each year if employed between two and 12 years
• 12 weeks’ notice if employed for 12 years or more

You’re also entitled to any holiday pay for annual leave you haven’t taken, and this should be paid at your normal rate.

Handling disputes

Common disputes arise from:

• Incorrect calculations of length of service
• Disputes over whether a genuine redundancy situation exists
• Arguments about the weekly pay used in calculations
• Questions about continuous service

If you believe your redundancy pay has been calculated incorrectly or you’ve been unfairly denied redundancy pay, you should:

1. First raise the issue informally with your employer
2. If unsuccessful, raise a formal grievance following your employer’s procedures
3. Contact ACAS for early conciliation if the dispute continues
4. Consider making a claim to an employment tribunal as a last resort

Enhanced redundancy packages

Many employers offer enhanced redundancy packages that exceed the statutory minimum. These might be based on:

• Higher multipliers than the statutory scheme
• Uncapped weekly pay
• Additional benefits like extended health insurance or outplacement support

If you’re offered an enhanced package, it may come with conditions, such as signing a settlement agreement. This is a legally binding document that typically prevents you from making future claims against your employer.

Additional support

During redundancy, various organizations can provide support:

• ACAS offers free, impartial advice on employment rights
• Citizens Advice can help with benefits claims and debt advice
• Trade unions (if you’re a member) can provide representation and support
• The government’s Redundancy Payments Service can help if your employer is insolvent

Frequently asked questions

How is statutory redundancy pay different from enhanced redundancy pay?

Statutory redundancy pay is the legal minimum your employer must pay, calculated using the formula set out in law. Enhanced redundancy pay is any amount above this that your employer chooses to offer, often based on their own formula or company policy.

Can my employer refuse to pay statutory redundancy?

No, if you’re eligible, your employer must pay statutory redundancy pay. If they refuse or can’t pay, you can claim through the government’s Redundancy Payments Service or make a claim to an employment tribunal.