If you are made redundant in the UK after completing 2 or more years of continuous service with your employer, you are legally entitled to receive Statutory Redundancy Pay (SRP).
Your statutory redundancy payment entitlement is calculated using a statutory formula based on your age, full completed years of service (capped at a maximum of 20 years), and your gross weekly pay (capped at the statutory maximum weekly cap set annually by the UK government).
⚙️ Rules & Thresholds
- Statutory Redundancy Entitlement Formula:
- Age 41 and older: 1.5 weeks’ pay for each full year of service.
- Age 22 to 40: 1.0 week’s pay for each full year of service.
- Under age 22: 0.5 week’s pay for each full year of service.
- Statutory Limits & Caps (2026/27):
- Maximum Statutory Weekly Pay Cap: £700 per week (if your gross weekly pay is higher, it is capped at £700/wk).
- Maximum Length of Service: Capped at 20 completed years.
- Maximum Statutory Redundancy Award: £21,000 (20 years × 1.5 × £700).
- HMRC £30,000 Tax Exemption: Statutory redundancy payments up to £30,000 are 100% tax-free and exempt from National Insurance. Any severance pay exceeding £30,000 is subject to Income Tax and employer NI.
📊 Practical Examples
- Age at Redundancy: 45 Years
- Completed Years of Service: 8 Years
- Gross Weekly Pay: £650.00 / week (below the £700 statutory cap)
- Age Service Multiplier: 5 years worked at age 41+ (5 × 1.5 = 7.5 weeks) + 3 years worked at age 37–40 (3 × 1.0 = 3.0 weeks) -> **10.5 Total Weeks' Pay**
Statutory Redundancy Pay Calculation: 10.5 weeks × £650.00 = **£6,825.00**.
Tax-Free Status: **100% Tax-Free & NI-Free** (well under the £30,000 HMRC tax-free threshold).
📑 Common Pitfalls
- Forgetting That Contractual Redundancy Pay May Be Higher: Many UK employers offer enhanced contractual redundancy pay (e.g. 1 month’s pay per year of service) which exceeds statutory minimums.
- Counting Partial Years of Service: Statutory redundancy pay counts full completed years of service only; 4 years and 11 months of service counts as 4 completed years.
- Failing to Claim Statutory Notice Pay: Redundancy pay is paid in addition to your statutory or contractual notice period pay (or Payment in Lieu of Notice - PILON).
❓ Frequently Asked Questions (FAQ)
You must have completed a minimum of 2 years (104 weeks) of continuous employment with the same employer by the date your notice period ends to qualify for statutory redundancy pay.
Statutory redundancy payments (and contractual severance payments) up to £30,000 are completely exempt from UK Income Tax and National Insurance. Any portion of a redundancy package exceeding £30,000 is subject to Income Tax.
For redundancy dismissals occurring on or after 6 April 2026, the statutory maximum weekly pay cap is £700 per week, and the maximum total statutory redundancy payment is £21,000.
If your UK employer enters liquidation or insolvency, you can claim your statutory redundancy pay, outstanding notice pay, holiday pay, and unpaid wages directly from the UK government's Insolvency Service (Redundancy Payments Office).