Statutory Redundancy Pay

Employees with 2+ years continuous service are entitled to statutory redundancy pay: 0.5 week's pay per year of service under age 22, 1 week's pay for ages 22-40, and 1.5 weeks for age 41+. Weekly pay is capped at £700 with a maximum of 20 years service counting.

Last updated: February 2025

£700

Weekly pay cap

20

Max years counted

£30,000

Tax-free threshold

What the Law Says

Sections 135-165 of the Employment Rights Act 1996 provide the statutory right to redundancy pay. The calculation is based on age, length of continuous service (maximum 20 years), and a week's pay (currently capped at £700). The first £30,000 of any redundancy payment is exempt from income tax under s.403 ITEPA 2003.

Your Obligations as an Employer

  • Pay statutory redundancy to all qualifying employees
  • Provide a written calculation showing how the amount was derived
  • Make payment on or shortly after the termination date
  • Include statutory redundancy within any enhanced redundancy package

What to Include in Contracts

Confirm entitlement to statutory redundancy pay, detail any enhanced redundancy scheme (specifying the formula), and clarify whether enhanced redundancy is inclusive or additional to statutory redundancy pay.

View related contract template

Common Mistakes

  • Not paying statutory redundancy because an enhanced scheme exists but pays less
  • Counting breaks in service that do not actually break continuity
  • Forgetting that fixed-term contract non-renewal can trigger redundancy pay

FAQ

Can an employer offer less than statutory redundancy pay?

No. Statutory redundancy pay is a legal minimum and cannot be reduced by contract. Employers can offer enhanced redundancy pay above the statutory amount but never below it. Any contractual scheme must be at least as generous as the statutory entitlement.

Does statutory redundancy pay count towards the £30,000 tax exemption?

Yes. Statutory redundancy pay is always within the £30,000 tax-free exemption as the maximum statutory amount (around £21,000) is below this threshold. Any additional ex gratia or enhanced redundancy payment also benefits from the exemption up to the £30,000 total.

Related Topics

Redundancy Pay Calculator

Redundancy Process

Settlement Agreement Rules

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This is guidance for UK employers, not legal advice. For complex employment law matters, consult a qualified employment solicitor or ACAS.

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