Employees in the UK who are made redundant after at least two years of continuous service are entitled to a statutory redundancy payment. The amount is calculated by reference to three factors: age, length of service (capped at 20 years), and weekly gross pay (capped at £719 for 2025-26). The multipliers are: half a week's pay per year of service while under 22; one week's pay per year between 22 and 40; and one and a half weeks' pay per year aged 41 and over. The maximum statutory payment is therefore £21,570.
The first £30,000 of a redundancy payment, including the statutory element, is exempt from income tax and NICs, provided it is a genuine redundancy payment and not a disguised payment for restrictive covenants or post-employment services. Amounts above £30,000 are taxable in full. Where an employer offers an enhanced redundancy scheme that exceeds the statutory minimum, the same tax treatment applies to the total combined payment.
Collective redundancy obligations apply where an employer proposes to dismiss 20 or more employees at one establishment within 90 days. In such cases, the employer must notify the Redundancy Payments Service (via form HR1) and consult with elected or trade union representatives for a minimum of 45 days before the first dismissal takes effect (30 days for 20 to 99 redundancies). Failure to consult can result in a protective award of up to 90 days' gross pay per affected employee.