How Redundancy Pay is Calculated in the UK
Understand statutory redundancy pay, enhanced packages, age bands, weekly pay caps, and tax treatment.
Open UK Redundancy Pay CalculatorStatutory versus enhanced redundancy
Statutory redundancy pay is the legal minimum for eligible employees. Some employers pay more through an enhanced redundancy scheme, contract, union agreement or settlement. Use the AtlasPeak Redundancy Pay Calculator to estimate the statutory minimum first, then compare it with any package your employer offers.
You usually need at least two years of continuous service to qualify for statutory redundancy pay. The calculation uses age, complete years of service and weekly pay, subject to the statutory cap.
Age bands and caps
The formula gives 0.5 week's pay for each full year worked under age 22, 1 week's pay for each full year from 22 to 40, and 1.5 weeks' pay for each full year aged 41 or over. Only the last 20 years of service count.
Weekly pay is capped for statutory purposes. For this 2026/27 calculator the cap is GBP643 per week. If your real weekly pay is higher, the statutory calculation still uses the cap.
Tax treatment and other payments
The first GBP30,000 of genuine redundancy pay is usually tax-free. Notice pay, holiday pay, bonuses and normal wages are different and are normally taxed through payroll. This distinction matters because a settlement can contain several types of payment.
Garden leave means you remain employed during notice while not working. A compromise or settlement agreement may set out enhanced terms, confidentiality and legal advice requirements.
How to use the estimate
Enter your current age, weekly pay and complete years of service. The calculator shows the age-band breakdown so you can see why older service years may be worth more.
Use the result as a floor, not necessarily the final offer. Enhanced packages, notice pay and negotiated settlements can change the total.
FAQ
Is redundancy pay taxable?
The first GBP30,000 of genuine redundancy pay is usually tax-free, but notice pay and wages are normally taxable.
How much redundancy pay am I entitled to?
Statutory pay depends on age, complete years of service, weekly pay and statutory caps.
Can my employer pay more than statutory redundancy?
Yes. Enhanced redundancy packages can pay more than the legal minimum.
What if I've worked less than 2 years?
You usually need at least two years of continuous service to qualify for statutory redundancy pay.
Try the calculator
Put the guide into practice with the UK Redundancy Pay Calculator and check your own numbers.
Use UK Redundancy Pay CalculatorRelated tools
Last updated: July 2026