How to calculate redundancy pay
Statutory redundancy pay is based on age, length of service and weekly pay, with a cap on the weekly figure. Contractual or enhanced schemes pay more, and part of a redundancy payment is often tax-free.
The rule
Statutory pay = weeks due per year of service (age-banded) × capped weekly pay × years of service
Do it automatically — Redundancy / severance payStep by step
- 1Count complete years of continuous service, usually up to a maximum.
- 2Apply the age-banded multiplier for the years worked at each age.
- 3Use weekly pay capped at the statutory limit, not your actual salary if it is higher.
- 4Add notice pay and untaken holiday, and check the tax-free threshold on the total package.
What trips people up
- • Notice pay and holiday pay are taxable even when the redundancy element is not.
- • Enhanced schemes in your contract override the statutory minimum.
Common questions
Is redundancy pay taxed?
Genuine redundancy compensation is tax-free up to a threshold; anything above it is taxed as income.
Do I need two years of service?
Statutory entitlement usually requires a minimum service period; contractual schemes may not.
Skip the maths
Estimate redundancy pay based on age, years of service and weekly earnings.
Open the statutory and enhanced tool