How to calculate redundancy pay
Redundancy pay is worked out on the basis of age, weekly pay and length of service (employees must have worked for you continuously for 2 years or more to qualify). They will be entitled to:
- 0.5 week’s pay for each full year of service under the age of 22
- 1 week’s full pay for each full year of service over 22 and under 41
- 1.5 weeks' full pay aged 41 and over
What is the maximum redundancy pay?
Weekly pay is capped at £643 (£669 in Northern Ireland) per week. Length of service is capped at 20 years.
The maximum amount of statutory redundancy pay an employee can receive is £19,290 (£20,070 in Northern Ireland).
Years of service or earnings over these amounts should not be included in the calculation.
Additional redundancy pay
As an employer, you can decide to offer redundancy pay over and above the statutory requirement. You can also choose to shorten the qualifying period to less than two years. This information should all be written into the employment contract.
Do you get taxed on redundancy pay?
Redundancy pay up to £30,000 is tax-free.
For more detailed calculations and to ensure compliance with the latest regulations, refer to our redundancy pay calculator.
Caveats and rules can be found here.
Do I need to tell HMRC if I am made redundant?
If you've been made redundant, you'll need let HMRC know if you're currently receiving tax credits, universal credit or other benefits.
How soon after redundancy can I start a new job?
After redundancy, starting a new job depends on your contract terms. If there's no restrictive clauses, you can start as soon as your notice period ends.
If you're paid in lieu of notice, you might begin immediately, but be cautious of any post-termination restrictions. Review your contract for details on 'restrictive covenants'.
