Statutory redundancy pay is a legal entitlement — not a discretionary payment — for employees who have been continuously employed for at least two years. The amount is calculated using a formula that takes into account three factors: your length of service (capped at 20 years), your age during each year of service, and your weekly pay (capped at a statutory limit that is updated each April by the government).
The age component is particularly important and often misunderstood. The multiplier is not based on your current age alone — it is applied year by year based on the age you were during each completed year of service. For each year worked under the age of 22, you receive half a week's pay. For each year between 22 and 40, you receive one week's pay. For each year worked aged 41 or over, you receive one and a half weeks' pay. If your service spans multiple age brackets, the correct multiplier is applied to each year individually.
The weekly pay cap means that even if your actual weekly earnings are higher, only the statutory maximum is used in the calculation. For 2026/27 this cap is £751 per week. This cap is distinct from the maximum total redundancy pay, which is calculated by multiplying the maximum 20 years by 1.5 (the highest multiplier) by the weekly pay cap — giving a maximum statutory payment of £22,530 for the 2026/27 tax year.
Redundancy pay is tax-free up to £30,000. This means the vast majority of statutory redundancy payments are received free of income tax and National Insurance. If you also receive contractual redundancy pay, pay in lieu of notice, or other termination payments, these may count towards the £30,000 threshold, so it is worth reviewing your total package carefully if it is close to or above that level.