How To Calculate Redundancy Payment

Calculate your statutory redundancy pay based on UK employment laws. Enter your details below to get an accurate estimate.

Being made redundant can be a stressful experience, but understanding your entitlements can help you navigate this challenging time. This comprehensive guide explains how to calculate redundancy payment in the UK, including statutory redundancy pay, contractual redundancy pay, and other important considerations.

What is Redundancy Pay?

Redundancy pay is compensation you receive when you’re dismissed from your job because your employer needs to reduce their workforce. There are two main types of redundancy pay:

1. Statutory redundancy pay – The legal minimum your employer must pay you
2. Contractual redundancy pay – Additional payment if your employment contract includes enhanced redundancy terms

Who Qualifies for Statutory Redundancy Pay?

To qualify for statutory redundancy pay, you must:

• Be an employee working under a contract of employment
• Have at least 2 years of continuous service with your employer
• Have been dismissed, laid off, or put on short-time working

Certain groups are not eligible, including:

• Self-employed people
• Crown servants or members of the armed forces
• Police officers
• Share fishermen
• Apprentices who aren’t employees

How to Calculate Statutory Redundancy Pay

The calculation for statutory redundancy pay is based on:

• Your age
• Your weekly pay (capped at £643 as of April 2024)
• Your length of continuous service (capped at 20 years)

The formula uses these multipliers:

Age	Multiplier per year of service
Under 22	0.5 week’s pay
22-40	1 week’s pay
41+	1.5 weeks’ pay

Step-by-Step Calculation Example

Let’s calculate redundancy pay for someone who:

• Is 45 years old
• Has 15 years of service
• Earns £800 per week
1. Cap the weekly pay at £643 (the maximum amount considered)
2. Break down service by age brackets:
   • Under 22: 0 years (no service in this bracket)
   • 22-40: 18 years (from age 27 to 45)
   • 41+: 2 years (from age 43 to 45)
3. Calculate each bracket:
   • Under 22: 0 × 0.5 × £643 = £0
   • 22-40: 18 × 1 × £643 = £11,574
   • 41+: 2 × 1.5 × £643 = £1,929
4. Total statutory redundancy pay: £0 + £11,574 + £1,929 = £13,503

Notice Period and Redundancy

You’re entitled to a notice period before your employment ends. The statutory minimum notice periods are:

Length of Service	Notice Period
1 month to 2 years	1 week
2 to 12 years	1 week per year
12+ years	12 weeks

Your employer can either:

• Let you work your notice period
• Pay you in lieu of notice (PILON)
• Give you garden leave (paid leave while you don’t work)

Tax on Redundancy Pay

Redundancy payments have special tax treatment:

• The first £30,000 of redundancy pay is tax-free
• Any amount above £30,000 is taxed as income
• Holiday pay and wages in lieu of notice are taxed as normal income

Contractual Redundancy Pay

Many employers offer enhanced redundancy packages that exceed the statutory minimum. These are typically:

• 1-2 weeks’ pay per year of service
• 3-6 months’ salary as a lump sum
• Outplacement support and career counseling

Always check your employment contract or company redundancy policy to understand what you’re entitled to.

How to Claim Redundancy Pay

1. Your employer should calculate and pay your redundancy pay when your employment ends
2. If they don’t, write to them formally requesting payment
3. If they refuse, you can make a claim to an employment tribunal within 3 months of your employment ending
4. For help, contact ACAS (Advisory, Conciliation and Arbitration Service) or Citizens Advice

Common Redundancy Payment Issues

Problems that may arise include:

• Employer refusing to pay redundancy
• Incorrect calculations (especially for part-time workers)
• Not receiving proper notice or pay in lieu
• Being selected for redundancy unfairly

If you face any of these issues, seek legal advice promptly as there are strict time limits for making claims.

Alternatives to Redundancy

Before making redundancies, employers should consider alternatives such as:

• Reducing or banning overtime
• Offering voluntary redundancy
• Retraining or redeploying staff
• Temporary layoffs or reduced hours
• Early retirement options

Redundancy and Your Rights

You have important rights during redundancy:

• Right to consultation (individual and collective if 20+ redundancies)
• Right to time off to look for work
• Right to appeal against redundancy
• Protection against unfair selection

Your employer must follow a fair redundancy process, including:

1. Warning and consulting with employees
2. Adopting fair selection criteria
3. Looking for suitable alternative employment
4. Giving proper notice

Official Resources:

GOV.UK: Redundancy – your rights GOV.UK: Calculate your redundancy pay ACAS: Redundancy advice