Redundancy pay

Employees you make redundant might be entitled to redundancy pay - this is called a ‘statutory redundancy payment’.

To be eligible, an individual must:

  • be an employee working under a contract of employment
  • have at least 2 years’ continuous service
  • have been dismissed, laid off or put on short-time working - those who opted for early retirement do not qualify

You must make the payment when you dismiss the employee, or soon after.

A redundant employee also has the right to a written statement setting out the amount of redundancy payment and how you worked it out.

Statutory redundancy pay rates

These are based on an employee’s age and length of employment and are counted back from the date of dismissal.

Employees get:

  • 1.5 weeks’ pay for each full year of employment after their 41st birthday
  • a week’s pay for each full year of employment after their 22nd birthday
  • half a week’s pay for each full year of employment up to their 22nd birthday

Length of service is capped at 20 years.

Your employee’s weekly pay is the average they earned per week over the 12 weeks before the day they got their redundancy notice.

If your employee earned less than usual because you used the Coronavirus Job Retention Scheme to put them ‘on furlough’, you must work out their redundancy payments based on what they would have earned normally.

Weekly pay is capped at £544. The maximum amount of statutory redundancy pay is £16,320.

Statutory redundancy pay rates may be different in Northern Ireland.

You can give your staff extra redundancy pay if you want to, or have a qualifying period of less than 2 years.

You can use the redundancy pay calculator to work out payments.

If you do not pay

If you fail to pay redundancy pay or if an employee disagrees with the amount, they have 3 months from the date their employment ended to make a claim for payment to an employment tribunal.

If an employee does not claim in time, a tribunal still has 6 months to decide whether or not they should get a payment.

If you have financial difficulties

If your business would become insolvent as a result of making the statutory redundancy payments, the Insolvency Service’s Redundancy Payments Service (RPS) may be able to help.

You’d have to repay any debt as soon as possible. Email the Redundancy Payments Service for more information. Include all of the following in your email:

  • your name
  • whether you’re the employer
  • whether you should be the main point of contact
  • the name of your business
  • your business address
  • number of redundancies

Redundancy Payments Service


Employees who’ve been made redundant only pay tax on payments over £30,000. They do not pay any National Insurance.

Tax and National Insurance are deducted from other termination payments, for example payment in lieu of holiday or notice.