Redundancy Pay Calculator UK 2026

Understanding Statutory Redundancy Pay in 2026

Facing redundancy is one of the most stressful events in a professional career. However, UK employment law provides a safety net known as Statutory Redundancy Pay (SRP). This guide reflects the regulations and rates applicable for the tax year 2025/2026, helping you understand your financial rights if your role is made redundant.

Updated on February 20, 2026, this guide incorporates the latest government thresholds. The key figures you need to know are the weekly pay cap, which stands at £643, and the maximum statutory redundancy amount, which is now £19,290.

Eligibility Criteria

Not every employee is automatically entitled to statutory redundancy pay. To qualify, you must meet the following criteria:

• You must be an employee working under a contract of employment.
• You must have at least 2 years of continuous service with your employer.
• You must have been genuinely dismissed due to redundancy (i.e., your role no longer exists or the workplace is closing).

Workers (who are not employees), self-employed contractors, and members of the armed forces usually do not qualify. Apprentices are eligible if they meet the criteria.

The Calculation Formula

The amount of redundancy pay you receive is strictly defined by a formula involving your age, your length of service (capped at 20 years), and your weekly pay (capped at £643). The calculation works backwards from your redundancy date.

Note: The maximum number of years that can be taken into account is 20. If you have worked for 25 years, only the most recent 20 years are used in the calculation.

The Weekly Pay Cap (2025-26)

Even if you earn £2,000 a week, the government sets a limit on the "weekly pay" used for the statutory calculation. For redundancies occurring on or after 6 April 2025, this cap is £643 per week. If you earn less than this, your actual weekly gross pay is used.

Consequently, the maximum amount payable (20 years × 1.5 weeks × £643) is £19,290.

Tax Implications of Redundancy Pay

One of the most critical aspects of your exit package is taxation. The good news is that the first £30,000 of statutory and enhanced redundancy pay is tax-free. This exemption applies to genuine redundancy payments.

However, it is vital to distinguish between "redundancy pay" and other parts of your final settlement:

• Redundancy Pay: Tax-free up to £30k.
• Notice Pay / PILON: Since 2018, all payments in lieu of notice (PILON) are treated as normal earnings. They are fully subject to Income Tax and National Insurance deductions, even if paid as a lump sum.
• Holiday Pay: Any accrued but untaken holiday pay is fully taxable.
• Bonuses: Any outstanding bonuses or commissions are fully taxable.

Statutory vs. Enhanced Redundancy

The figures calculated above are the legal minimum. Many employers offer "Enhanced Redundancy" packages as part of their employment contracts or as a gesture of goodwill. This might involve:

• Ignoring the £643 statutory cap and using actual salary.
• Offering 2 or 3 weeks' pay per year of service instead of the statutory formula.
• Providing a lump sum ex-gratia payment.

Check your staff handbook or contract. If an enhanced scheme exists, it often becomes a contractual right.

Settlement Agreements

In many redundancy situations, employers may offer a Settlement Agreement (formerly known as a Compromise Agreement). This is a legal document where you agree to waive your rights to take the employer to an employment tribunal (e.g., for unfair dismissal) in exchange for a financial settlement.

You must receive independent legal advice for a Settlement Agreement to be valid. Usually, the employer contributes to your legal fees. These agreements often result in a higher payout than the statutory minimum.

Notice Periods and PILON

When made redundant, you are entitled to a notice period. The statutory minimum notice periods are:

• 1 month to 2 years service: 1 week notice.
• 2 to 12 years service: 1 week notice for each complete year.
• 12+ years service: 12 weeks maximum notice.

Your contract may state a longer notice period (e.g., 3 months). Your employer may ask you to work this notice, put you on "garden leave" (stay home but remain employed), or pay you in lieu of notice (PILON) to end your employment immediately.

Unfair Dismissal vs. Redundancy

Redundancy is a "fair" reason for dismissal, provided the procedure is fair and the redundancy is genuine. It might be considered unfair dismissal if:

• There was no genuine need for redundancy (the role still exists and is filled by someone else).
• The selection process was unfair or discriminatory (e.g., based on age, gender, pregnancy, or part-time status).
• The employer failed to consult properly.
• Suitable alternative employment was available but not offered.

Consultation Rights

Employers have a legal duty to consult with employees before making redundancies.

• Individual Consultation: Essential for fairness, even for a single redundancy.
• Collective Consultation: Required if 20 or more employees are being made redundant at one establishment within 90 days.
  • 20-99 employees: Consultation must start at least 30 days before dismissals take effect.
  • 100+ employees: Consultation must start at least 45 days before dismissals.

Failure to consult collectively can lead to a "Protective Award" claim, worth up to 90 days' gross pay per employee.

TUPE Protection

If your business is sold or your contract is outsourced, the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) protect your rights. Your new employer takes over your existing contract, including your continuous service history. They cannot make you redundant simply because of the transfer; there must be an "Economic, Technical, or Organizational" (ETO) reason.

Claiming if Your Employer is Insolvent

If your employer goes into administration or liquidation and cannot pay, you can apply to the Insolvency Service (Redundancy Payments Service). They pay statutory redundancy, arrears of pay, notice pay, and holiday pay, subject to the statutory caps mentioned above.

Frequently Asked Questions

1. Can I claim redundancy if I find a new job immediately?

Yes. Statutory redundancy pay is compensation for the loss of your job, not for unemployment. You are entitled to the full amount even if you start a new job the day after your notice period ends.

2. Does voluntary redundancy affect my rights?

Voluntary redundancy is usually offered under the same or better terms than compulsory redundancy. Once accepted, it is a dismissal by reason of redundancy, and the first £30,000 is still tax-free. You should ensure the terms are clearly written in a settlement agreement.

3. I am on maternity leave. Can I be made redundant?

You can be made redundant, but you have special protection. If your role is at risk, you must be offered any suitable alternative vacancy before other colleagues. From April 2024, this protection was extended to cover pregnancy and a period of 18 months after birth.

4. How is the "Weekly Pay" calculated for variable hours?

If your pay varies (e.g., zero-hours or commission-based), your weekly pay is usually calculated as the average of the 12 weeks prior to the redundancy notice date.

5. What happens if I reject an offer of alternative employment?

If your employer offers you "suitable alternative employment" and you unreasonably refuse it, you may lose your right to statutory redundancy pay. Suitability depends on pay, location, status, and your personal circumstances.

6. Can I be made redundant for being off sick?

No, that would likely be disability discrimination or unfair dismissal. However, you can be selected for redundancy while off sick if the selection criteria are objective and fair (e.g., the whole department is closing).

7. Is the £643 cap likely to change?

The government reviews statutory caps annually, typically adjusting them in line with the Retail Prices Index (RPI) in April. This guide uses the rates confirmed for the tax year beginning April 2025.