Statutory Redundancy Details
📊 Redundancy Breakdown
Statutory Redundancy Pay (SRP) is the legal minimum compensation employers in the UK must pay to employees who are made redundant after completing at least 2 years of continuous service.
Understanding how your age, length of service, and weekly pay caps combine allows you to verify your redundancy payout accuracy.
⚙️ Statutory Calculation Rules & Caps for 2026/27
Your statutory redundancy entitlement is calculated using your age for each complete year of continuous service:
- Under 22 years old: 0.5 week’s pay per complete year of service.
- Aged 22 to 40: 1 week’s pay per complete year of service.
- Aged 41 or older: 1.5 weeks’ pay per complete year of service.
Statutory Caps & Tax Exemptions
- Weekly Pay Cap: Capped at £700.00 per week for 2026/27 (if your actual gross weekly pay is lower, your actual pay is used).
- Service Cap: Capped at a maximum of 20 complete years of service.
- Maximum Statutory Payout: Capped at £21,000.00 (20 years × 1.5 × £700).
- £30,000 Tax Exemption: The first £30,000 of genuine redundancy pay is completely exempt from Income Tax and Class 1 National Insurance.
📊 Practical Redundancy Worked Examples
Below are two worked calculation examples illustrating age multipliers and weekly caps:
- Gross weekly pay: £750.00 (Capped at statutory **£700.00 / week**)
- Years of service aged 41+: **10 years × 1.5 weeks = 15 weeks' pay**
Calculation: 15 weeks × £700.00 = £10,500.00 total payout.
- Gross weekly pay: **£500.00 / week** (Below £700 cap, so £500 used)
- Years of service aged 22-40: **8 years × 1.0 week = 8 weeks' pay**
Calculation: 8 weeks × £500.00 = £4,000.00 total payout.
📑 Common Pitfalls & Redundancy Warnings
- Including Incomplete Years of Service: Statutory redundancy pay ONLY counts full complete years of continuous service. If you have been employed for 4 years and 11 months, you receive pay for 4 years, not 5.
- Confusing Statutory Redundancy with Notice Pay: Statutory Redundancy Pay is compensation for job loss. Pay in Lieu of Notice (PILON) and accrued holiday pay are separate earnings subject to standard PAYE Income Tax and NI.
- Accepting Less Than Statutory Minimums: Contractual redundancy schemes can offer more than the statutory minimum (Enhanced Redundancy), but legally cannot pay less than statutory rules.
❓ Frequently Asked Questions (FAQ)
No. Under the Employment Rights Act 1996, you must have at least 2 complete years of continuous service with your employer to qualify for statutory redundancy pay.
No. Under Section 401 ITEPA 2003, genuine redundancy payments up to £30,000 are completely exempt from Income Tax and National Insurance.
If your employer goes into liquidation or administration, you can claim your statutory redundancy pay, unpaid wages, and notice pay directly from the government's Insolvency Service Redundancy Payments Office (RPO).
Redundancy pay is treated as capital savings for Universal Credit. Savings under £6,000 do not affect UC awards. Capital between £6,000 and £16,000 reduces UC, and capital over £16,000 disqualifies you from UC until spent on living expenses.