UK Redundancy Pay Calculator- Free Statutory Redundancy Calculator

UK Redundancy Pay Calculator – Free Statutory Redundancy Calculator | Super-Calculator.com

UK Redundancy Pay Calculator

Calculate your statutory redundancy pay, notice period entitlement, and tax implications for 2025/26

Your Age at Redundancy45 years

Years of Continuous Service10 years

Weekly Pay (Before Tax)£800

Enhanced Redundancy Multiplier1.0x (Statutory)

Apply Weekly Pay Cap (£719)?

Statutory Redundancy Pay

£0

Weeks Entitlement

0 weeks

Capped Weekly Rate

£719

Notice Period

0 weeks

Notice Pay

£0

Tax Information: Your redundancy package details will appear here.

Your Redundancy Package Breakdown

50k 37.5k 25k 12.5k 0

Total Package£0

Tax-Free£0

Taxable£0

Tax Due£0

Net Receipt£0

Tax-Free Amount
£0

Estimated Tax

£0

Your Redundancy Calculation

Age Band	Years in Band	Weeks Entitlement

Notice Period Entitlement

Category	Description	Value

Tax Implications

Category	Description	Amount

Important: Tax calculations are estimates based on current rates. Your actual tax liability depends on your total income for the tax year. Notice pay (PILON) is always subject to income tax and National Insurance regardless of the £30,000 threshold.

Redundancy Pay by Age

See how your redundancy pay would differ at different ages with the same years of service.

Age	Weeks	Statutory Pay	Difference

UK Redundancy Pay Calculator: Your Complete Guide to Calculating Statutory and Enhanced Redundancy Entitlements

Being made redundant can be one of the most challenging experiences in your working life, bringing uncertainty about finances and future employment. Understanding exactly what you are entitled to receive when facing redundancy is crucial for planning your next steps and ensuring you receive the full compensation owed to you. This comprehensive guide explains how UK redundancy pay works in 2025/26, including the statutory calculation formula, tax implications, notice period entitlements, and how to maximise your redundancy package. Whether you are facing compulsory redundancy or considering voluntary redundancy, this calculator and guide will help you understand your rights and financial entitlements.

What is Statutory Redundancy Pay?

Statutory redundancy pay is a legal entitlement guaranteed to employees who are made redundant after working continuously for the same employer for at least two years. This payment is separate from your notice pay and any other contractual benefits you may receive. The purpose of statutory redundancy pay is to provide financial support during the transition period while you search for new employment. The amount you receive depends on three key factors: your age at the time of redundancy, your length of continuous service with your employer, and your weekly earnings up to the current statutory cap.

From 6 April 2025, the statutory limits have been updated to reflect inflation and economic changes. The weekly pay cap increased from £700 to £719, and the maximum statutory redundancy payment you can receive is now £21,570. These figures apply to redundancies occurring on or after 6 April 2025, so if your redundancy date falls before this, the previous lower limits would apply. It is worth noting that these limits are reviewed annually by the government, typically taking effect from the first week of April each tax year.

Statutory Redundancy Pay Formula

Redundancy Pay = Number of Qualifying Weeks x Capped Weekly Pay

The number of qualifying weeks is calculated based on your age and years of service. Weekly pay is capped at £719 (from April 2025), and the maximum years counted is 20. The formula considers different multipliers for different age bands, creating a tiered calculation system.

Age-Based Redundancy Multipliers Explained

The statutory redundancy pay calculation uses different multipliers depending on your age during each year of service. This tiered approach recognises that older workers may face greater challenges when seeking new employment. Understanding these multipliers is essential for calculating your exact entitlement. The calculation works backwards from your redundancy date, applying the appropriate multiplier for each complete year of service based on your age during that year.

For years of service when you were under 22 years old, you receive 0.5 weeks of pay for each complete year. This reflects the typical situation of younger workers who may have started employment at 18 or thereabouts. For years of service when you were aged between 22 and 40 inclusive, you receive 1 week of pay for each complete year. This standard rate applies to the majority of working adults. For years of service when you were aged 41 or over, you receive 1.5 weeks of pay for each complete year. This enhanced rate acknowledges that mature workers may face longer job search periods and greater financial commitments.

Age-Based Multiplier Rates

Under 22: 0.5 weeks | Ages 22-40: 1 week | Ages 41 and over: 1.5 weeks

The calculation applies these multipliers to each complete year of continuous service, working backwards from your redundancy date. Only the 20 most recent years count toward the calculation, and partial years do not qualify.

Weekly Pay Cap and How It Affects Your Payment

Your weekly pay is calculated based on your average gross earnings over a reference period, but it is capped at a statutory maximum. From 6 April 2025, this cap stands at £719 per week. If your actual weekly earnings exceed this amount, your redundancy calculation will use £719 rather than your real salary. This cap significantly affects higher earners, who may receive considerably less than their actual weekly rate would suggest. For example, someone earning £1,000 per week would have their calculation based on £719, effectively reducing their payment by nearly 30 percent.

Your weekly pay typically includes your basic salary, regular overtime you are contractually obliged to work, and any regular bonuses or commission that form part of your normal remuneration. It does not usually include irregular overtime, one-off bonuses, or benefits in kind such as company cars or health insurance. If your pay varies from week to week, your employer should calculate the average over the 12 weeks before your notice period begins. This averaging approach ensures that seasonal variations or temporary changes do not unfairly affect your redundancy payment.

Key Point: Maximum Statutory Redundancy Pay

The maximum statutory redundancy payment in 2025/26 is £21,570. This applies to someone aged 41 or over with 20 or more years of service earning at or above the weekly cap. The calculation would be: 20 years x 1.5 weeks x £719 = £21,570.

Qualifying Service Requirements

To qualify for statutory redundancy pay, you must have worked continuously for your employer for at least two years by the date your employment ends. Continuous employment means unbroken service with the same employer, although certain breaks do not interrupt continuity. These include periods of statutory leave such as maternity, paternity, adoption, or shared parental leave, as well as time spent on sick leave or jury service. Additionally, if your employment transfers to a new employer under TUPE regulations, your continuous service typically carries over.

Only complete years of service count toward your redundancy calculation. If you have worked for 5 years and 11 months, you would only receive credit for 5 complete years. This is why the timing of redundancy can sometimes be significant, as being made redundant just a few weeks earlier or later could affect whether an additional year of service is counted. If your employer is planning redundancies, they should not deliberately time them to avoid employees crossing into an additional year of service, as this could constitute unfair dismissal.

Notice Period Entitlements During Redundancy

In addition to redundancy pay, you are entitled to a notice period when being made redundant. Statutory notice periods are determined by your length of service and represent the minimum notice your employer must provide. These are separate from any contractual notice periods specified in your employment contract, which may be longer but cannot be shorter than the statutory minimum. During your notice period, you are entitled to receive your normal pay and maintain your employment benefits.

The statutory notice periods are structured as follows: if you have worked for your employer for between one month and two years, you are entitled to at least one week of notice. For employees with two or more years of service, the notice period increases by one week for each complete year of employment, up to a maximum of 12 weeks for those with 12 or more years of service. Your employer may offer payment in lieu of notice instead of requiring you to work your notice period, which means you receive your notice pay immediately and your employment ends sooner.

Statutory Notice Period Calculation

Less than 2 years: 1 week | 2 to 12 years: 1 week per year | 12 or more years: 12 weeks maximum

These are minimum requirements. Your employment contract may specify longer notice periods. Contractual notice cannot be less than statutory notice, so you always receive at least the statutory minimum.

Tax Implications of Redundancy Payments

Understanding the tax treatment of redundancy payments is essential for knowing exactly how much money you will receive. The good news is that the first £30,000 of redundancy pay is completely tax-free and does not attract National Insurance contributions. This tax-free threshold applies to statutory redundancy pay and any additional ex-gratia payments your employer makes as compensation for loss of employment. However, not all payments you receive when leaving due to redundancy benefit from this exemption.

Certain payments are taxed as normal income regardless of the £30,000 threshold. These include any unpaid salary owed to you, accrued holiday pay, bonuses or commission payments, and crucially, payment in lieu of notice. PILON is always subject to income tax and National Insurance contributions, whether it is a contractual entitlement or a discretionary payment from your employer. If your total redundancy payment exceeds £30,000, the excess is subject to income tax at your marginal rate, though it remains exempt from employee National Insurance contributions.

Key Point: Tax Treatment Summary

Tax-free up to £30,000: Statutory redundancy pay, enhanced redundancy pay, ex-gratia payments. Always taxable: Holiday pay, notice pay or PILON, unpaid wages, bonuses, commission. The excess over £30,000 is taxed at your income tax rate but not subject to National Insurance.

Enhanced Redundancy Packages

Many employers offer enhanced redundancy packages that exceed the statutory minimum. These enhanced packages are particularly common in the public sector, large corporations, and organisations with strong trade union representation. Enhanced terms might include higher multipliers than the statutory rates, removal of the weekly pay cap so calculations use your actual salary, counting more than 20 years of service, or providing additional fixed payments on top of the calculated amount. Some employers offer voluntary redundancy with particularly generous terms to encourage employees to leave willingly.

If your employer offers enhanced redundancy terms, you should carefully compare the offer against your statutory entitlement to understand the true value of the enhancement. It is also worth checking whether any enhanced payments push your total package above the £30,000 tax-free threshold, as this could affect your net receipt. In some cases, it may be possible to negotiate having excess payments made directly into your pension, which can provide significant tax advantages and help preserve your retirement savings during a period when you might otherwise need to reduce contributions.

Holiday Pay Entitlements on Redundancy

When you are made redundant, you are entitled to payment for any accrued but untaken annual leave. This holiday pay is calculated based on your normal rate of pay and is separate from your redundancy payment. Unlike redundancy pay, holiday pay is considered part of your normal earnings and is therefore subject to income tax and National Insurance contributions. You will typically receive this payment as part of your final pay packet along with any outstanding salary owed.

The calculation of accrued holiday pay depends on your annual leave entitlement and how much of the leave year has elapsed. If your leave year runs from January to December and you are made redundant in September, you would have accrued 9/12 of your annual entitlement. From this, you would deduct any leave already taken to arrive at the amount owed. Some employment contracts allow employers to require you to take outstanding leave during your notice period, which would reduce or eliminate any holiday pay due. Always check your contract and discuss with your employer to understand how your specific situation will be handled.

How to Calculate Your Redundancy Pay Step by Step

Calculating your statutory redundancy pay involves several steps, and accuracy is important to ensure you receive the correct amount. First, determine your length of continuous service by counting complete years from your start date to your redundancy date. Remember that only the most recent 20 years count toward the calculation. Second, identify your weekly pay, remembering to cap it at £719 if your actual earnings exceed this amount. If your pay varies, calculate the average over the 12 weeks before your notice period began.

Third, work backwards from your redundancy date, assigning each complete year of service to the appropriate age band. Count how many years fall into each category: under 22, ages 22 to 40, and ages 41 and over. Fourth, multiply each category by its respective multiplier: 0.5 weeks for under 22, 1 week for 22 to 40, and 1.5 weeks for 41 and over. Finally, add these together to get your total weeks of pay and multiply by your capped weekly earnings. The result is your statutory redundancy payment before any tax considerations.

Example Calculation

Sarah is 45 years old and has worked for her employer for 15 years. Her weekly salary is £800, which exceeds the £719 cap. Her calculation: she worked from age 30 to 45. Years aged 30-40 (11 years at 1 week each) = 11 weeks. Years aged 41-45 (4 years at 1.5 weeks each) = 6 weeks. Total: 17 weeks x £719 = £12,223 statutory redundancy pay.

What Happens if Your Employer Cannot Pay

If your employer becomes insolvent and cannot pay your redundancy entitlement, you can claim from the government through the Redundancy Payments Service. The government acts as a safety net to ensure employees receive their statutory redundancy pay even when their employer has failed financially. Claims must be made within six months of your employment ending, and you will need to provide evidence of your employment details and the redundancy circumstances.

The Redundancy Payments Service can also cover other amounts owed by an insolvent employer, including up to eight weeks of unpaid wages capped at the statutory rate, holiday pay for up to six weeks, and statutory notice pay. Processing these claims typically takes several weeks, and you will need to provide documents such as your P45, wage slips, and contract of employment. If you have any difficulties with the claims process, organisations like ACAS and Citizens Advice can provide free guidance and support.

Rights During the Redundancy Process

Employees facing redundancy have specific legal rights that employers must respect. You have the right to be consulted about the proposed redundancy, with the consultation being meaningful and not merely a formality. During consultation, your employer should explain why redundancies are necessary, discuss the selection criteria being used, explore alternatives to redundancy, and consider any representations you make. The length of consultation depends on the number of redundancies being made, with collective consultations required when 20 or more employees face redundancy.

You also have the right to reasonable time off to look for new work or arrange training. This applies if you have been continuously employed for at least two years and are under notice of redundancy. Your employer should allow you paid time off, though what counts as reasonable will depend on your circumstances and the needs of the business. Additionally, if your employer offers you suitable alternative employment within the organisation and you unreasonably refuse it, you may lose your right to statutory redundancy pay.

Appealing a Redundancy Decision

If you believe your redundancy is unfair, you have the right to appeal the decision. Unfair redundancy might include situations where you were selected based on discriminatory criteria, the selection process was not genuinely followed, proper consultation did not take place, or your employer did not consider suitable alternative roles. Your appeal should be made in writing to your employer, clearly explaining why you believe the redundancy decision was unfair and what outcome you are seeking.

If your internal appeal is unsuccessful, you may be able to take your case to an employment tribunal. You must normally submit a tribunal claim within three months less one day from your last day of employment, though you must first contact ACAS for early conciliation. At a tribunal, you would need to demonstrate that the redundancy was unfair, and if successful, you could receive compensation for unfair dismissal in addition to your statutory redundancy pay. Seeking advice from an employment lawyer or trade union representative can be valuable if you are considering this route.

Settlement Agreements in Redundancy Situations

Many redundancies are concluded through settlement agreements, also known as compromise agreements. These are legally binding contracts in which you agree to waive certain employment claims in exchange for a financial settlement. Settlement agreements typically offer more generous terms than statutory redundancy alone and may include enhanced redundancy pay, additional ex-gratia payments, agreed references, and contributions toward legal fees. For a settlement agreement to be valid, you must receive independent legal advice, and your adviser must be named in the agreement.

If you are offered a settlement agreement, take time to consider it carefully. The initial offer is often negotiable, and employers expect some discussion about terms. Consider not just the total sum offered but also the tax implications, the restrictive covenants being proposed, and any confidentiality clauses. You should also check what happens to share options, pension benefits, and other deferred compensation. An experienced employment lawyer can help you understand the offer and negotiate better terms where appropriate.

Key Point: Settlement Agreement Advice

You must receive independent legal advice before signing a settlement agreement for it to be binding. Many employers contribute toward this cost, typically offering between £250 and £500 plus VAT. Do not sign anything until you have taken advice and fully understand what you are agreeing to.

Planning Ahead: Using Your Redundancy Package Wisely

Receiving a redundancy payment provides an opportunity to make financial decisions that could benefit you in the long term. Consider your immediate needs such as paying essential bills and maintaining your mortgage or rent payments while you search for new employment. Building or maintaining an emergency fund covering three to six months of expenses can provide security during your transition. If you have debts with high interest rates, using some of your redundancy money to reduce these can save money over time.

For those with significant redundancy payments, particularly amounts exceeding the £30,000 tax-free threshold, consider pension contributions as a tax-efficient way to preserve your wealth. If your employer agrees, having excess payments made directly into your pension can avoid income tax entirely. You might also consider whether this is the right time to retrain, start a business, or take an extended career break. Whatever you decide, consulting a financial adviser can help you make the most of your redundancy payment and plan for your financial future.

Common Mistakes to Avoid When Calculating Redundancy Pay

Several common errors can lead to incorrect redundancy pay calculations. One frequent mistake is including partial years of service, when only complete years count toward the calculation. Another error is using your actual weekly pay rather than the capped amount when your earnings exceed the statutory limit. Some people also miscalculate the age bands, applying the wrong multiplier to certain years of service. Always work backwards from your redundancy date and apply the multiplier based on your age during each year of service, not your current age.

It is also important not to confuse redundancy pay with other payments you might receive. Notice pay, holiday pay, and any outstanding wages are separate entitlements with different tax treatments. Combining everything together can make it difficult to verify that each element has been calculated correctly. Request a detailed breakdown from your employer showing how they arrived at each figure, and check their calculations against the statutory rules. If you identify any errors, raise them promptly as mistakes can sometimes be made in complex calculations.

Frequently Asked Questions

What is the statutory redundancy pay cap for 2025/26?

From 6 April 2025, the weekly pay cap for statutory redundancy calculations is £719. This means that even if you earn more than this amount per week, your redundancy pay will be calculated using £719 as your weekly rate. The maximum statutory redundancy payment possible under these limits is £21,570, which applies to someone aged 41 or over with 20 or more years of service.

How many years of service do I need to qualify for redundancy pay?

You need at least two years of continuous service with your employer to qualify for statutory redundancy pay. This period must be unbroken, although certain types of leave such as maternity, paternity, and sick leave do not break continuity. If you have worked for less than two years, you are not entitled to statutory redundancy pay, though your employer may offer a voluntary payment.

Is redundancy pay taxable?

The first £30,000 of redundancy pay is tax-free and does not attract National Insurance contributions. This includes statutory redundancy pay and any additional compensation for loss of employment. However, any amount above £30,000 is subject to income tax at your marginal rate, though it remains exempt from employee National Insurance. Notice pay, holiday pay, and outstanding wages are always taxable as normal earnings.

What is the difference between statutory and enhanced redundancy pay?

Statutory redundancy pay is the legal minimum your employer must pay, calculated using the government formula with capped weekly pay. Enhanced redundancy pay is any additional amount your employer offers above this minimum. Enhancements might include higher multipliers, using your actual salary instead of the capped amount, counting additional years of service, or providing flat-rate extra payments.

How is my weekly pay calculated for redundancy purposes?

Your weekly pay for redundancy purposes includes your basic salary, any regular overtime you are contractually required to work, and regular bonuses or commission forming part of your normal pay. If your pay varies, the average over the 12 weeks before your notice period begins is used. The calculated amount is then capped at £719 for statutory calculations from April 2025.

Can I receive redundancy pay and notice pay together?

Yes, redundancy pay and notice pay are separate entitlements, and you are entitled to receive both. Redundancy pay compensates you for losing your job, while notice pay covers the period during which you would normally continue working. Your employer cannot offset one against the other, and both must be paid according to your entitlements.

What happens if I am made redundant while on maternity leave?

If you are made redundant while on maternity leave, you retain all your redundancy rights. Your redundancy pay is calculated based on your normal full pay, not your statutory maternity pay. Additionally, you have special priority rights to be offered any suitable alternative vacancies before other redundant employees. The redundancy must be genuine and not related to your maternity leave.

How long do I have to claim statutory redundancy pay?

You have six months from the date your employment ends to claim statutory redundancy pay from your employer. If your employer refuses to pay or disputes your entitlement, you can make a claim to an employment tribunal within this same six-month period. If your employer is insolvent, you can claim through the government Redundancy Payments Service within the same timeframe.

What is the maximum notice period for redundancy?

The maximum statutory notice period is 12 weeks, which applies to employees with 12 or more years of continuous service. However, your employment contract may specify a longer notice period, and if so, the contractual period applies. Statutory notice is the minimum, so contractual notice can be longer but never shorter than what the law requires.

Can my employer force me to take voluntary redundancy?

No, voluntary redundancy must be genuinely voluntary. If your employer pressures you into accepting voluntary redundancy, it may actually be compulsory redundancy in disguise, which has different legal implications. However, if you refuse voluntary redundancy and your role is later selected for compulsory redundancy, you would still receive statutory redundancy pay, possibly at less favorable terms than the voluntary package.

Are part-time workers entitled to redundancy pay?

Yes, part-time workers have exactly the same redundancy rights as full-time workers, provided they meet the qualifying service requirement of two years. Your redundancy pay is calculated based on your actual weekly earnings from your part-time work, subject to the same statutory cap. Treating part-time workers less favorably in redundancy situations could constitute discrimination.

What if I find a new job before my notice period ends?

If you find a new job during your notice period, you can give counter-notice to leave early without losing your redundancy pay, provided you do so during the obligatory period. The obligatory period is equal to your statutory notice entitlement, counting backwards from your dismissal date. You should give your counter-notice in writing and ensure you leave during the obligatory period to protect your redundancy entitlement.

How does payment in lieu of notice affect my redundancy package?

Payment in lieu of notice means your employment ends immediately and you receive pay instead of working your notice period. PILON is always subject to income tax and National Insurance, regardless of whether it is contractual or discretionary. It is separate from your redundancy pay and does not count toward the £30,000 tax-free threshold. Your total package would include both payments.

Can I negotiate my redundancy package?

Yes, redundancy packages are often negotiable, especially the enhanced or ex-gratia elements. While statutory redundancy pay is fixed by law, employers may have flexibility on additional payments, notice arrangements, references, continuation of benefits, or contributions toward retraining costs. If you are offered a settlement agreement, negotiation is expected and you should seek legal advice before accepting.

What is garden leave during redundancy?

Garden leave means you remain employed during your notice period but are not required to attend work. You continue to receive your normal salary and benefits throughout this period. Your employment only ends when the notice period expires. Garden leave differs from PILON, where your employment ends immediately. During garden leave, you cannot usually start work for a new employer without permission.

Does redundancy pay affect my benefits entitlement?

Redundancy pay may affect your eligibility for means-tested benefits, as the money you receive could count as capital or savings when assessed for benefits. Universal Credit, for example, considers capital over £6,000 when calculating payments, with capital over £16,000 potentially disqualifying you entirely. Seek advice from Citizens Advice or Jobcentre Plus about how your specific situation might be affected.

What rights do agency workers have regarding redundancy?

Agency workers employed directly by the agency may qualify for statutory redundancy pay if they have two years of continuous service with that agency. However, many agency workers are engaged on temporary contracts that do not provide continuity of employment. Check your contract and employment status carefully. If you are unsure, seek advice from ACAS or an employment lawyer.

Can I be made redundant and then rehired?

If your employer makes you redundant and then offers to rehire you within four weeks, you may not be entitled to redundancy pay if the new role is suitable alternative employment and you unreasonably refuse it. If you accept re-engagement on different terms, your continuous service may carry over. Genuine redundancy followed by recruitment for a different role may be legitimate, but dismissing and rehiring to avoid redundancy rights could be unfair.

How do I challenge unfair redundancy selection?

If you believe you were unfairly selected for redundancy, first raise a formal grievance with your employer through their internal appeals process. If unsuccessful, you can make a claim to an employment tribunal for unfair dismissal within three months less one day of your last working day. You must contact ACAS for early conciliation first. Gather evidence of the selection criteria used and how they were applied.

What is the consultation period for redundancy?

There is no fixed statutory consultation period for individual redundancies, but consultation must be meaningful and genuine. For collective redundancies of 20 to 99 employees, consultation must begin at least 30 days before dismissals take effect. For 100 or more redundancies, the minimum period is 45 days. These periods apply to the consultation process, not individual notice periods.

Can I claim redundancy pay from multiple employers?

Each period of employment with a different employer generates a separate redundancy entitlement. If you are made redundant from unconnected employers at different times, you can receive up to £30,000 tax-free from each. However, if the employers are associated, you may only have one £30,000 threshold across all related redundancies. HMRC applies specific rules for associated employers.

What happens to my pension when I am made redundant?

Your pension benefits already accrued remain yours regardless of redundancy. For defined contribution pensions, you can leave the fund invested, transfer to a new employer scheme, transfer to a personal pension, or access the funds if you meet the age requirements. For defined benefit pensions, you typically retain a deferred pension. Consider seeking advice from Pension Wise or a financial adviser about your options.

Is there a time limit for paying redundancy?

Your employer should pay your redundancy entitlement promptly, typically with your final pay packet or shortly after your employment ends. There is no specific statutory deadline, but unreasonable delay could be challenged. If payment is not forthcoming, write to your employer requesting payment by a specific date, and escalate to an employment tribunal claim if necessary within the six-month time limit.

Do apprentices qualify for redundancy pay?

Apprentices employed under a contract of employment can qualify for statutory redundancy pay, provided they have completed at least two years of continuous service. Traditional apprenticeships that end when training completes may not create redundancy entitlements. Modern apprenticeship agreements vary, so check whether your arrangement is employment or something else. If uncertain, seek advice from ACAS.

How does TUPE affect redundancy pay?

When your employment transfers to a new employer under TUPE regulations, your continuous service typically transfers with you. This means your years of service with the previous employer count toward calculating any future redundancy pay from the new employer. Your terms and conditions also transfer, including any enhanced redundancy provisions in your original contract.

Can redundancy pay be paid into my pension?

If your employer agrees, redundancy payments exceeding £30,000 can potentially be paid directly into your pension as an employer contribution. This can provide significant tax advantages, as pension contributions are not subject to income tax when made by your employer. However, annual allowance limits apply, and you should seek advice from a financial adviser or tax professional before arranging this.

What is the difference between redundancy and dismissal?

Redundancy occurs when your job role ceases to exist or the employer needs fewer employees to do work of a particular kind. Dismissal is the broader term for ending employment, which can include redundancy but also encompasses dismissal for conduct, capability, or other reasons. Only genuine redundancy attracts statutory redundancy pay, though unfair dismissal in any form may lead to compensation through a tribunal.

Are directors entitled to redundancy pay?

Directors who are also employees of the company can qualify for statutory redundancy pay if they meet the service requirements. Being a director does not automatically disqualify you. However, some directors are office holders rather than employees, which may affect entitlement. The terms of your engagement and whether an employment contract exists will determine your status and rights.

How do I calculate redundancy pay for variable hours workers?

For employees whose hours and pay vary, weekly pay for redundancy purposes is calculated as the average over the 12 weeks ending on the calculation date, which is typically the day your notice period begins. Weeks where no pay was received are excluded and replaced with earlier weeks. This averaging ensures that temporary fluctuations do not unfairly affect your redundancy entitlement.

What should I do if I disagree with my redundancy pay calculation?

First, request a detailed breakdown from your employer showing exactly how they calculated your redundancy pay. Check each element against the statutory rules: weekly pay, years of service, and age-based multipliers. If you identify an error, raise it in writing with specific details of the discrepancy. If your employer refuses to correct a genuine error, you can pursue a tribunal claim within six months of your employment ending.

Conclusion

Understanding your redundancy pay entitlements is crucial when facing job loss, helping you plan your finances and ensure you receive everything you are owed. Statutory redundancy pay provides a safety net based on your age, length of service, and weekly earnings, with the 2025/26 limits setting a maximum weekly pay of £719 and total payment of £21,570. Combined with notice pay, holiday pay, and any enhanced terms your employer offers, your complete package can provide valuable financial support during your transition to new employment.

Remember that the first £30,000 of redundancy pay is tax-free, making it a valuable form of compensation. If you are offered a settlement agreement or enhanced package, take time to understand the full value and seek legal advice before accepting. Do not hesitate to question calculations that seem incorrect or raise concerns about the redundancy process itself. Organisations like ACAS, Citizens Advice, and employment lawyers can provide guidance if you are unsure about your rights or believe you have been treated unfairly. While redundancy can be challenging, being informed about your entitlements helps you navigate this period with greater confidence and financial security.