Redundancy Pay

Site updated on August 5, 2016

The amount of redundancy pay you are entitled to will initially depend upon your contract of employment or an agreement through a trade union.

There is also a statutory minimum payment which is based on your age, length of service and your weekly pay. The upper and lower age limits were removed by the age discrimination law in October 2006, so all ages now qualify for redundancy pay, even if you are over 65 when made redundant. Your service from the age of 16 now also counts.

  • For those years of service between the ages of 16 and 21 you receive half a week’s pay for each completed year of service.
  • For service between the ages of 22 and 40, you receive one week’s pay for each completed year of service.
  • For service between the ages of 41 and over, you receive one and a half week’s pay for each completed year of service.

There are no longer any reductions which should be made in the last year of service before retirement. (The statutory redundancy entitlement used to be reduced by 1/12 for each month by which the age approaches 65.)

For calculating statutory redundancy pay, there is a limit on a week’s pay. The figure in 2016 is £479 per week.  If you earn over this amount, this will not count towards your Statutory redundancy, but it will count if your Employer pays more than the Statutory minimum – check your contract. You may also be entitled to more pay if your employer has paid higher amounts in the past – this is often called “custom and practice” and may have becomes a contractual right.

Again, for statutory purposes, the maximum service which can be taken into account is 20 years. This means that the maximum amount of redundancy pay which is payable is 30 weeks – this is when all 20 years are over the age of 40. Redundancy pay is tax free up to a limit of £30,000.

To check if you have received the correct amount, contact our Advice Line

Employers can decide to disregard these limits and pay you higher amounts – check your contract of employment or handbook for a redundancy policy.

The right to a statutory redundancy payment can be lost if you unreasonably refuse an offer of alternative employment with the employer or an associated employer. The offer of alternative employment must be “reasonable”. You are also entitled to a trial period in this alternative employment. The statutory period for this trial period is 4 weeks. If employer and employee agree to a longer trial period, usually because training is needed, this will be acceptable.  At the end of the trial period, if it is agreed that the job is not a suitable alternative, you are still entitled to claim a redundancy payment. If you turn down a reasonable offer of another job from your Employer, you may lose your redundancy pay.

In addition to redundancy pay, you are still entitled to be paid for your notice period, if you do not work your notice, plus any outstanding holiday pay.

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