UK Statutory Redundancy Pay: Complete Guide

What Is Statutory Redundancy Pay?

Statutory Redundancy Pay is a one-off payment that employers in the UK must provide to eligible employees who are dismissed due to redundancy. It is governed by the Employment Rights Act 1996 and is designed to compensate long-serving employees for losing their job through no fault of their own. SRP is separate from notice pay and any contractual redundancy pay that may be offered by the employer.

Eligibility for Statutory Redundancy Pay

To qualify for SRP, an employee must meet all of the following criteria:

• Employment status: The individual must be classified as an employee (not a worker or contractor) under UK employment law.
• Continuous service: The employee must have at least 2 years of continuous service with the employer. Continuous service includes time working abroad for the same employer under certain circumstances.
• Reason for dismissal: The dismissal must be due to redundancy, which occurs when the employer needs to reduce the workforce because a job role is no longer needed, the business is closing, or the business is relocating.
• Age and working hours: There is no upper age limit for claiming SRP since the Default Retirement Age was phased out in 2011. Both full-time and part-time employees are eligible.

Certain categories of employees are excluded from SRP, including Crown servants, members of the armed forces, police officers, and employees on fixed-term contracts that have reached their agreed end date (unless the contract was ended early).

How Statutory Redundancy Pay Is Calculated

The SRP calculation uses a formula based on the employee's age, length of continuous service, and weekly pay. The formula assigns different amounts for each year of service depending on the employee's age at the time of each year of service:

Key Calculation Rules

• Weekly pay cap: As of April 2025, the maximum weekly pay used in the SRP calculation is £700 (this figure is reviewed annually).
• Service cap: A maximum of 20 years of continuous service can be counted toward the calculation.
• Maximum SRP: The maximum statutory redundancy pay is capped at £21,000 (based on 20 years at £700 per week at 1.5x rate). The actual maximum depends on the specific combination of age bands and service years.
• Rounding: Service is counted in complete years; any remaining months are not included in the calculation.

Step-by-Step SRP Calculation Example

Let's walk through a practical example to illustrate how SRP is calculated:

Example: Employee Profile

• Age at redundancy: 50
• Continuous service: 15 years
• Weekly pay: £600 (below the cap)

Breaking Down the Years of Service

We need to count the years of service in each age band, working backward from the current age:

In this example, the employee would receive £11,700 in statutory redundancy pay. If the employee's weekly pay exceeded £700, the calculation would use £700 as the weekly pay figure.

Contractual vs. Statutory Redundancy Pay

Many UK employers offer contractual redundancy pay that is more generous than the statutory minimum. If your employment contract or a company redundancy policy provides for a higher payment, the employer must pay the contractual amount. Common enhancements include:

• Using actual weekly pay without the £700 cap
• Counting all years of service (not capped at 20)
• Using a higher multiplier (e.g., 2 weeks' pay per year of service)
• Lump sum payments in addition to the formula-based amount

Employers cannot offer less than the statutory minimum. If an employer's policy is less generous than SRP, the statutory amount prevails.

Tax Treatment of Redundancy Pay in the UK

Statutory Redundancy Pay is tax-free up to £30,000. This £30,000 threshold includes both the SRP and any contractual redundancy pay. Amounts above £30,000 are subject to income tax. National Insurance contributions are not payable on redundancy pay. Note that notice pay and holiday pay are treated differently and are taxable as earnings.

How to Claim Statutory Redundancy Pay

If you are being made redundant, follow these steps to ensure you receive your SRP:

1. Request written confirmation: Ask your employer for written details of your redundancy pay calculation, including how it was computed.
2. Review the calculation: Verify that the correct age bands, years of service, and weekly pay have been used. Use a redundancy pay calculator to check the figures.
3. Raise concerns with your employer: If you believe the calculation is incorrect, raise the issue with your employer's HR department or in writing.
4. Early conciliation through ACAS: If the dispute is not resolved, contact ACAS for early conciliation before taking legal action.
5. Employment Tribunal: If conciliation fails, you can file a claim with an Employment Tribunal. Claims must generally be filed within 3 months minus 1 day of the date of dismissal.

Special Circumstances

Insolvent Employers

If your employer is insolvent and cannot pay your redundancy, you can apply to the Redundancy Payments Service (RPS), which is part of the Insolvency Service. The RPS will pay your statutory redundancy entitlement directly, along with certain other debts such as unpaid wages and holiday pay (subject to caps).

Alternative Employment

If your employer offers you suitable alternative employment and you unreasonably refuse it, you may lose your right to SRP. What constitutes "suitable" depends on factors such as pay, hours, location, and status. If you accept alternative employment but leave within a 4-week trial period, you may still be entitled to redundancy pay.

Fixed-Term Contracts

Employees on fixed-term contracts are generally not entitled to SRP if the contract ends on its agreed date. However, if the contract is terminated early, or if the employee has at least 2 years of continuous service and the contract is not renewed, SRP may be payable.