How Much is Redundancy Pay?


If you are made redundant from your job, you may be eligible to receive redundancy pay.

There are two types of redundancy pay: statutory and contractual. Statutory redundancy pay is required by law to be paid by employers.

Contractual redundancy pay refers to any payment stated as a term within your employment contract. Both types of redundancy pay are payable by your employer.

Do you have the right to redundancy pay?

You have the right to statutory redundancy pay where you have worked continuously for your employer for two years, where your job has genuinely become redundant to the operation of the business you were employed by and where you are classed as an employee, whether full time or part time.

Fixed term contracts

If you have worked for your employer on a fixed term contract for at least two years or you have worked on a number of shorter contracts that add up to a continuous period of employment of at least two years, you may be eligible for statutory redundancy pay where your job becomes redundant and ceases to exist, and your fixed term contract is therefore not renewed.

Temporary and short term lay-offs

Where you meet the statutory redundancy pay eligibility conditions and you are temporarily laid off for more than 4 consecutive weeks or more than 6 non consecutive weeks in a period of 13 weeks, you are eligible to claim statutory redundancy pay.

You must, however, inform your employer of your claim no later than 4 weeks after your final non working day in the 4 week or 6 week lay-off period.

What statutory redundancy pay will you receive?

If you meet the statutory redundancy pay eligibility conditions, you are entitled to receive:

  • a half week’s pay for each complete year worked when you were aged under 22
  • a full week’s pay for each complete year worked when you were aged 22 or older, and under 41 years of age
  • one and a half week’s pay for each complete year worked when you were aged 41 or older

So, if you worked for the same employer continuously for 20 years, from the age of 38 to 58 years old, at a weekly rate of £300 per week, the calculation for your redundancy pay would look like this:

for the 3 years worked under the age of 41, 3 weeks’ pay (£900)
for the 17 years worked from age 41 until 58, 25 and a half weeks’ pay (£7,650)
Total statutory redundancy pay = £8,550

Is there a maximum to how much statutory redundancy pay you can receive?

The number of years you have worked for an employer (your length of service) that can be counted towards redundancy pay is capped at a maximum of 20 years.

If your redundancy came into effect on or since 6 April 2018, there is a weekly pay cap of £508, and the maximum statutory redundancy pay you can receive is £15,240.

For Northern Ireland, the weekly pay cap is £500.

Contractual redundancy pay

Contractual redundancy pay is an amount that an employer may pay on top of the standard statutory redundancy pay.

Whereas eligibility for statutory redundancy pay requires two years’ continuous employment, this is not necessarily required for contractual redundancy pay. Details of the contractual redundancy pay conditions put in place by your employer should be stated in your employment contract.
Where contractual redundancy pay is offered, it will generally be written into your employment contract. Where you do not have an employment contract, speak to your employer and check the staff handbook.

Legally, contractual redundancy pay cannot be paid at a lower rate than statutory redundancy pay.

When wouldn’t you be eligible for redundancy pay?

There are a number of scenarios where you would not receive statutory redundancy pay.

Firstly, if after the initial redundancy notification, your employer makes it possible for you to continue your employment, you are not eligible to receive redundancy pay.

Where your employer offers you an alternative role within their business but you reject their offer without a good reason, you may not claim redundancy pay.

If you have worked for your employer for less than two years, you are not eligible to receive statutory redundancy pay.

If you leave to take up employment elsewhere after redundancy is offered to you but before your job comes to an end, you will likely not be eligible for redundancy pay.

If you take early retirement, you are not eligible for redundancy pay.

Finally, if you are dismissed for misconduct before your job comes to an end, you may not claim redundancy pay.

Furthermore, the following workers are not eligible to receive redundancy pay:

  • a close family member (parent, spouse, child) who works as a domestic servant
  • crown servants
  • armed forces
  • police services
  • former registered dock workers
  • share fishermen
  • employee of a foreign government
  • apprentices who have not gained employment by the end of their period of training

Employer not paid up or you disagree with the amount of redundancy pay?

The first step is always to approach your employer and voice your concerns. You are within your rights to involve your union representative or an employee representative if you feel that this is necessary.

If you are still unhappy with your employer’s response, then you may seek early conciliation by contacting Acas.

Finally, you may take your employer to a tribunal. This process must be started within 6 months of the end of your employment.

Do you pay tax on redundancy pay?

Tax and national insurance must be paid on any salary or holiday payment you receive, however, when it comes to your redundancy pay, the first £30,000 is both tax and national insurance free. This is regardless of whether your redundancy pay is simply the statutory amount or combined with contractual redundancy pay.

What happens if you’re receiving sick pay?

Generally, sickness payments are made at a lower rate than your normal working rate.

Should you be made redundant while you are receiving sick pay, then your redundancy pay will be calculated using your work rate.
What happens if you’re made redundant while on maternity leave?

If you are made redundant while you are on maternity leave, your redundancy pay will be calculated using your normal working pay rate, not the maternity pay rate.

When do you receive your redundancy pay?

You should be paid your redundancy pay on either your final day at work or a later date where you have agreed to this.

The payment should be made in the usual way that you have received your salary payments in the past.

Accompanying your redundancy payment, you should be supplied with a written explanation of your payment and how it was calculated.

Why take legal advice when facing redundancy?

When facing redundancy and the related employment and financial worries, take specialist legal advice to ensure that you are fully informed on your rights and legal position and that your employer is offering you the correct amount of redundancy pay.