Redundancy pay is a payment an employee receives when they are made redundant (i.e., their job is no longer needed). How much redundancy pay a person gets depends on their age, how long they have worked continuously for their employer, and their weekly pay before tax (gross pay). Employers may also offer enhanced redundancy pay above the statutory minimum.

How Redundancy Pay Is Calculated

• For each full year of continuous employment, the redundancy pay is calculated based on the employee's age during that year:
  • Aged 21 or under: half a week's pay per year
  • Aged 22 to 40: one week's pay per year
  • Aged 41 or over: one and a half weeks' pay per year
• Redundancy pay is capped at a maximum of 20 years of service.
• Weekly pay considers the average pay over the last 12 weeks before redundancy, including guaranteed overtime, bonuses, or commission if applicable.
• There is a maximum cap on the week's pay used for calculation (currently £719 per week as of April 2025).
• Up to £30,000 of redundancy pay is tax-free.

Additional Notes

• If an employee is paid "in lieu of notice" (PILON), the notice period is added to the length of service for redundancy pay calculations.
• Employers must provide a written breakdown of how redundancy pay was calculated.
• If suitable alternative work is offered and refused, the employee may lose their right to statutory redundancy pay.
• Statutory redundancy pay is generally due if the employee has worked for the employer for at least 2 years continuously.

This framework is based primarily on UK redundancy pay rules, which are commonly referenced in explanations of redundancy pay.