How Is Redundancy Pay Calculated in the UK?

If you are facing redundancy, one of the first questions you will have is how much money you are entitled to. UK law sets out a clear formula for calculating statutory redundancy pay, based on your age, length of service and weekly earnings. This guide walks you through every step of that formula so you can understand exactly how your payment is worked out.

Who qualifies for statutory redundancy pay?

Before looking at the calculation itself, it is worth confirming whether you qualify. To be entitled to statutory redundancy pay in the UK, you must:

• Be classed as an employee (not a self-employed contractor or agency worker, although some agency workers may qualify in certain circumstances)
• Have worked for your employer continuously for at least 2 years
• Have been dismissed by reason of redundancy — this means your employer needs fewer employees to do work of a particular kind, or is closing the business or your workplace

If you resign voluntarily, you will not normally qualify unless your employer has asked for voluntary redundancy applications. If you have been unfairly selected for redundancy, you may have a separate claim but the calculation method for statutory pay remains the same.

The three factors in the formula

Statutory redundancy pay is determined by three things:

1. Your age during each year of employment
2. Your length of continuous service with the employer (capped at 20 years)
3. Your weekly gross pay (capped at £719 per week for 2025/26, or £749 in Northern Ireland)

Each complete year of service earns you a certain fraction of a week's pay. The fraction depends on how old you were during that year, which brings us to the age bands.

The three age bands and multipliers

The UK government divides employees into three age brackets, each with a different multiplier:

The logic behind these bands is that older workers are considered to face greater difficulty finding new employment, so they receive a higher rate per year of service. This is one of the few areas where age-based differentiation is permitted under UK employment law, because it is specifically authorised by statute.

It is important to note that these multipliers apply on a year-by-year basis. If you worked for an employer from age 38 to age 48, your years of service before age 41 would be calculated at 1.0 week's pay, while the years from age 41 onwards would be calculated at 1.5 weeks' pay.

The weekly pay cap

Your weekly gross pay is used in the calculation, but there is a statutory cap. For the 2025/26 tax year, this cap is £719 per week in England, Scotland and Wales (£749 in Northern Ireland). If you earn more than the applicable cap — roughly £37,388 per year, or £38,948 in NI — your redundancy pay will be calculated using the cap figure.

For employees paid monthly, your weekly pay is typically calculated by multiplying your monthly salary by 12 and dividing by 52. For employees with variable pay (such as shift workers or those on commission), an average of the last 12 weeks' pay before the redundancy date is normally used.

The weekly pay cap is reviewed by the government each year and usually increases in April. You can check the detailed guide for higher earners if the cap affects you.

Maximum years of service

Only the most recent 20 years of continuous employment count towards your statutory redundancy pay. If you have worked for the same employer for 25 years, only the last 20 years will be used in the calculation. The calculation works backwards from your leaving date, so the 20 most recent years are always selected — which typically benefits you, as you will have been older (and therefore attracting a higher multiplier) in recent years.

Putting it together: the formula

For each complete year of service (up to 20), the calculation is:

Redundancy pay for that year = Multiplier (based on age) × Weekly pay (up to £719, or £749 in NI)

Your total statutory redundancy pay is the sum of all the individual year amounts.

Worked example

Let us work through a concrete example. Consider an employee with the following details:

• Age at redundancy date: 45
• Annual gross salary: £35,000 (which is £673.08 per week — below both the £719 and £749 NI caps)
• Continuous service: 10 years
• Age when they started: 35

Working backwards from their redundancy date:

Total statutory redundancy pay: (4 × £1,009.62) + (6 × £673.08) = £4,038.48 + £4,038.48 = £8,076.96

This entire amount falls well below the £30,000 tax-free threshold, so this employee would receive the full amount without any tax deduction.

What about partial years?

Only complete years of continuous service count towards the calculation. If you have worked for 7 years and 11 months, you will be treated as having 7 complete years of service. The remaining months do not contribute any additional redundancy pay. This is one reason why the timing of a redundancy can sometimes matter — if you are close to completing another full year, it may be worth raising this with your employer.

How is the calculation date determined?

The relevant date for calculating your redundancy pay is normally the date your employment ends. If your employer gives you notice, this is the date the notice period expires. If you receive a payment in lieu of notice (PILON), the relevant date is typically the date you would have worked to had notice been served in full. Your age on the relevant date determines which age band your final year of service falls into.

Does the calculation differ for part-time workers?

No. Part-time employees have exactly the same entitlement to statutory redundancy pay as full-time workers. The calculation uses your actual weekly pay (based on your contracted hours), and the same multipliers apply. The only difference is that your weekly pay will typically be lower, which naturally results in a lower total payment. You can read more in our guide to redundancy pay for part-time workers.

Beyond statutory pay

It is worth remembering that the statutory calculation sets a legal minimum. Many employers offer enhanced or contractual redundancy packages that pay more generously. These might use higher multipliers, uncapped weekly pay, or count more than 20 years of service. If your contract of employment or company redundancy policy provides for a more generous payment, you are entitled to the higher amount. See our guide to statutory vs contractual redundancy pay for more detail.