Calculate statutory redundancy pay
Full years only. Round down. E.g. 6 years and 9 months = 6.
Before tax. Capped at £751 by law. If pay varies, use the average over the last 12 weeks.
How the calculation works
Statutory redundancy pay is set by law. It is based on three things: the employee's age, their length of continuous service and their weekly gross pay. The weekly pay is capped at £751 from April 2026, regardless of actual earnings. Service is capped at 20 years.
Employees with less than two years of service do not qualify for statutory redundancy pay. A fair redundancy process must still be followed regardless of service length.
The calculation formula
Working backwards from the last day of employment, you apply the following multiplier for each complete year of service:
| Age during that year of service | Multiplier | Pay per year |
|---|---|---|
| Under 22 | 0.5 | Half a week's pay |
| 22 to 40 | 1.0 | One week's pay |
| 41 and over | 1.5 | One and a half weeks' pay |
Weekly pay is capped at £751 regardless of actual earnings. Service is capped at 20 years. The calculation works backwards from the last day of employment, applying the multiplier for the age the employee was during each year worked.
Worked examples
Example 1: Simple case
Employee is 35 years old. Has worked for the employer for 8 years. Weekly gross pay is £500.
All 8 years were worked between ages 22 and 40, so the multiplier is 1.0 throughout.
Example 2: Crossing an age band
Employee is 45 years old. Has worked for the employer for 12 years. Weekly gross pay is £600.
4 years were worked aged 41 or over (multiplier 1.5). 8 years were worked aged 22 to 40 (multiplier 1.0).
Example 3: Pay above the weekly cap
Employee is 38 years old. Has worked for 5 years. Weekly gross pay is £1,200.
Weekly pay is capped at £751. All 5 years were worked aged 22 to 40.
Important points to note
The weekly pay cap
The maximum weekly pay used in the calculation is £751 from April 2026. If your employee earns more than this, you still use £751 in the calculation. You can choose to pay more than the statutory amount but are not required to.
Weekly pay should also include any guaranteed overtime agreed in the contract and any contractual bonuses or commission the employee is entitled to. Non-guaranteed overtime does not count.
Service capped at 20 years
Only the most recent 20 years of service count. If an employee has worked for you for 25 years, you calculate redundancy pay based on the most recent 20 years only.
Payment in lieu of notice
If you pay an employee in lieu of notice rather than having them work their notice period, you must add the statutory notice period onto their length of service when calculating redundancy pay. This can push them into another year of service and increase the entitlement.
This calculator does not account for PILON. If you are paying in lieu of notice, add the statutory notice weeks to the employee's actual service length before entering it above. Statutory notice is 1 week per full year of service, up to a maximum of 12 weeks.
Tax on redundancy pay
Statutory redundancy pay is tax-free up to £30,000. Any enhanced redundancy pay above the statutory amount may be subject to tax depending on the circumstances.
Employees on family-related leave
If an employee is on maternity, paternity, adoption or other family-related leave when made redundant, their redundancy pay is based on their normal weekly pay before the leave started, not their reduced pay during leave.
Common questions
Do I have to pay redundancy if my employee has been with me less than two years?
No statutory redundancy pay is owed, but a fair process must still be followed.
What if my employee's pay varies week to week?
Use their average weekly pay over the 12 weeks before the redundancy notice was given. If they did not work a full week during that period due to holiday or sickness, replace it with an earlier week.
Can I pay more than the statutory amount?
Yes. Some employers offer enhanced redundancy pay, particularly when offering voluntary redundancy. This should be consistent and documented to avoid discrimination claims.
When must redundancy pay be made?
Payment should be made when employment ends or on the employee's final pay date. You must tell the employee in writing how their pay has been calculated.
Want the calculation done for your employee?
The Redundancy Process Pack includes a full statutory pay calculation based on your employee's age, start date and salary. Checked and clearly shown so you can verify it before using it.
Get My Redundancy Pack | £149 Takes 5 minutes. No calls. Delivered within 24 hours. Not legal advice.