Key Takeaways
- Statutory redundancy payment is a legal minimum available if you have been continuously employed by your employer for at least two years.
- The amount of statutory redundancy pay depends on your age, length of continuous service, and capped weekly pay, with a maximum limit set by law.
- Not all employees qualify for statutory redundancy pay, and exclusions apply such as certain fixed-term contracts, some self-employed roles, and refusing suitable alternative employment.
- You may be entitled to more than statutory redundancy payment if your contract provides for enhanced or ex gratia payments, or if you negotiate a settlement agreement.
- The first £30,000 of redundancy pay, including statutory redundancy payments, is generally tax-free, but additional payments and notice pay may be taxed differently.
- Our solicitors can review your redundancy package, explain your rights, and negotiate improved terms such as higher ex gratia compensation or agreed reference.
- Acting early is important—once you accept a redundancy offer or settlement agreement, you usually cannot claim more or bring an unfair dismissal claim.
- Settlement Agreement Lawyers are SRA regulated and rated Excellent with over 1,400 five-star reviews from employees across the UK, with advice usually free for you because your employer pays our fees.
Statutory Redundancy Payment: What Are Your Rights and How Much Could You Get?
If you are facing redundancy, you may be entitled to a statutory redundancy payment—a legal minimum your employer must pay if you have worked for them continuously for at least two years. This statutory redundancy payment is your right under employment law, but not everyone qualifies, and the calculation can be complex, depending on your age, years of continuous service, and capped weekly pay. For any settlement agreement to be valid, you must receive independent legal advice; in almost every case, your employer will cover the cost, so the advice is usually free to you.
Before agreeing to any redundancy package, it is crucial to understand what you are owed, how tax might apply, and whether you could negotiate for more—either through your contractual terms or by using a settlement agreement to secure benefits like an enhanced redundancy payment or agreed reference. Our solicitors will review your offer in detail, ensure your rights are protected, and can often negotiate better terms on your behalf.
This article explains the statutory redundancy payment rules in plain English, with step-by-step guides to eligibility, calculation, negotiation, enhanced pay, tax treatment, and the process if your employer is insolvent or refuses to pay. For confidential advice about your redundancy package, call our solicitors on 0800 054 1144 or book your settlement agreement advice online.
Statutory redundancy payment: What are you entitled to and how is it calculated?
The statutory redundancy payment is a legal entitlement under the Employment Rights Act 1996 for employees who are dismissed due to redundancy, provided they meet set eligibility criteria. The amount is based on your age, weekly pay (up to a statutory cap), and length of continuous service with your employer. This payment is separate from any contractual redundancy payments, enhanced redundancy pay, or money that could be negotiated under a settlement agreement.
When calculating your entitlement, employers must use the formula set out by law. This considers your years of continuous service (up to a maximum of 20), your age during each year worked, and your gross weekly pay (capped at the government’s statutory maximum, updated each April). This payment is a guaranteed minimum if you qualify and are made genuinely redundant.
Bear in mind that redundancy pay is distinct from notice pay, holiday pay, and other termination payments, which are dealt with separately and usually paid in addition to the redundancy sum. If you are leaving under a settlement agreement, that agreement may include or replace this statutory minimum.
Maria, aged 45 with 11 years’ service and gross weekly pay of £550, faces redundancy. The cap on weekly pay is £643 (2023–24 tax year). She is entitled to:
– 1.5 weeks’ pay for each year aged over 41 (5 years x 1.5 = 7.5 weeks)
– 1 week’s pay for each year aged 22–41 (6 years x 1 = 6 weeks)
Her statutory redundancy payment is 13.5 x £550 = £7,425.
For more on how statutory redundancy payment is calculated, visit the gov.uk redundancy pay guidance or use our Redundancy Calculator.
Who qualifies for statutory redundancy pay? Eligibility criteria explained
To qualify for statutory redundancy payment in England and Wales, you must be an employee with at least two years’ continuous service at the date your employment ends. Workers, contractors, some agency staff, and the self-employed are excluded. Your dismissal must be for a genuine redundancy reason—such as the role no longer existing, workplace closure, or a reduced need for employees.
You will not usually qualify if you have unreasonably refused an offer of suitable alternative employment from your employer or if your employer is offering continued work. Some categories, like armed forces personnel, police, share fishermen, or domestic servants in private homes, are excluded from statutory redundancy rights.
If your employer wrongly denies your eligibility, you can challenge this in the Employment Tribunal within six months. Consider whether your situation overlaps with other rights, such as unfair dismissal or discrimination.
Check your continuous service carefully—previous time with the same employer, including under TUPE transfers, may count towards redundancy qualification. Gaps of less than a week usually do not break continuity.
How is statutory redundancy pay calculated? Age bands, service, and weekly pay cap
Statutory redundancy payment is worked out using the following formula:
- 0.5 week’s pay for each full year worked under age 22
- 1 week’s pay for each full year worked aged 22–40
- 1.5 weeks’ pay for each full year worked aged 41 and over
Only complete years of service count, up to a maximum of 20 years. The calculation uses your gross weekly pay at the time of redundancy but is subject to a statutory cap. For 2023–24, this cap is £643 per week.
The maximum statutory redundancy pay is therefore 20 x 1.5 = 30 weeks’ capped pay, currently £19,290. Employers must provide a written statement of how your redundancy pay is calculated if you request it.
| Employee Age | Statutory Redundancy Pay per Year of Service |
|---|---|
| Under 22 | 0.5 week’s pay |
| 22–40 | 1 week’s pay |
| 41 and over | 1.5 weeks’ pay |
If you are aged 43 and have worked for your employer for 7 years, with an average gross weekly pay of £500, and all years were over age 41, your statutory redundancy payment would be 7 x 1.5 x £500 = £5,250.
Understanding continuous service and breaks in employment
Continuous service is the period you have worked for your employer without a qualifying break. A break of a whole week or more (without a statutory reason such as sickness, maternity, or TUPE transfer) generally starts a new period of service. This figure is essential for your redundancy entitlement and affects other employment rights.
Employment transferred to you via TUPE (Transfer of Undertakings (Protection of Employment) Regulations 2006) preserves your continuity. Authorised absences—such as jury service, family leave, or military service—will not break continuous service.
Never resign before clarifying your redundancy rights—resigning usually ends your entitlement to redundancy pay. Always get advice before taking any step.
Statutory redundancy payment for part-time and irregular workers
Part-time and irregular workers are entitled to statutory redundancy pay on the same basis as full-time employees, provided they meet the two-year rule and are classed as employees. The payment uses their actual (or average, for variable hours) gross weekly pay, subject to the statutory cap.
For irregular hours, the weekly pay is usually averaged over the 12 weeks prior to redundancy. Part-time employees receive full weeks counted towards service—no pro-rata reduction.
Sam works 20 hours per week for £250 gross. Over six years, aged 35, his redundancy payment would be 6 x 1 x £250 = £1,500, assuming all six years were aged 22–40.
Statutory redundancy pay vs enhanced redundancy payment
Statutory redundancy payment is the legal minimum if you qualify for redundancy. However, many employers offer enhanced redundancy pay—either under a contractual redundancy scheme, company policy, or through negotiation (especially via a settlement agreement).
Enhanced payments may mean more weeks’ pay per year of service, extra sums for loss of benefits, or higher rates for longer-serving staff. Always check your contract, staff handbook, or company policies for enhanced redundancy terms.
Employers do not have to pay more than the statutory minimum unless your contract or policy says so. Enhanced redundancy pay is particularly common where redundancy consultation requirements apply, such as in collective redundancy situations.
If your employer has a documented redundancy policy or has paid enhanced redundancy to others, you may have a right to similar sums. Review your position with our solicitors before accepting any offer.
Can you negotiate a higher redundancy settlement or ex gratia payment?
Yes, you can often negotiate a higher redundancy payment or an ex gratia sum on top of your statutory entitlement. This is more likely if there are risks of unfair dismissal, potential claims (such as discrimination), or process failures. Many employers are willing to enhance payments to secure certainty through a settlement agreement.
Ex gratia payments are discretionary sums above your legal entitlement and often help both parties avoid litigation. Factors influencing negotiations include your length of service, how redundancy was selected, employer behaviour, and how well the process was followed.
Our solicitors frequently negotiate better redundancy packages for clients facing redundancy, pay disparity, or redundancy and discrimination. We identify possible claims and use them to improve your terms.
An employee offered £7,000 statutory redundancy, but with selection process concerns. After negotiation, our solicitors secured a £15,000 package plus an agreed reference.
If you want to maximise your redundancy settlement, call our settlement agreement solicitors on 0800 054 1144 or book your settlement agreement advice online for a same-day confidential discussion. Advice is free to you as your employer pays our fees.
Legal requirements for settlement agreements: Why you need independent legal advice (s.203 ERA 1996)
To be valid, a settlement agreement must comply with s.203 Employment Rights Act 1996. This lets employees legally waive statutory rights, such as redundancy pay, but only after receiving independent legal advice from a qualified solicitor. Without such advice, the agreement is unenforceable, and you retain your right to claim redundancy.
Nearly always, your employer will pay our legal fees, meaning there is no cost to you. Our solicitors help you understand every detail—especially what you might be waiving or any discretionary element of your payment. Once signed and the adviser’s certificate is provided, the agreement is legally binding.
Settlement agreements can improve your overall package, confirm terms like agreed references, and clarify details, including confidentiality. Employers value certainty and reduced legal risk; employees should seek experienced SRA-regulated solicitors who handle redundancy and employment law regularly.
Never sign a settlement agreement or resign until you have had your own legal advice. Acting in haste can lead to permanent loss of valuable rights—speak to our solicitors first.
The role and scope of mandatory legal advice in redundancy settlements
Legal advice under s.203 ERA 1996 must cover the impact of the agreement on your rights, which claims you are giving up, and any you retain. The advisor must have current professional indemnity insurance (usually a solicitor or regulated advisor). Our solicitor’s certificate verifies you have received this legal advice, making it possible to waive statutory rights.
Advice includes statutory redundancy payment, notice pay, ex gratia sums, tax (including the £30,000 tax-free cap), and enforceability of restrictions. Employers cannot force you to use their nominated adviser; you are free to choose our solicitors.
Settlement agreements cannot ask you to waive future claims (such as future discrimination or criminal issues)—the waiver should be clearly limited to existing rights for fairness and enforceability.
Jane was offered three months’ salary and statutory redundancy. Our solicitors explained her after-tax payment, claims waived, and negotiated a better reference as part of the deal.
Is statutory redundancy pay tax free in the UK? Tax on redundancy, notice, and settlement payments
Statutory redundancy payment is generally tax-free up to £30,000, as long as it is paid because of true redundancy and not disguised earnings. This exemption is found in the Income Tax (Earnings and Pensions) Act 2003.
Other termination payments, such as notice pay (including payment in lieu of notice or PILON), accrued but unpaid holiday, and some ex gratia sums, may be taxable. Notice pay always attracts tax and National Insurance, whatever your circumstances. If your total redundancy and ex gratia payments exceed £30,000, only the excess is subject to income tax and, in many cases, NICs.
| Payment Type | Tax-Free? | Subject to Income Tax/NICs? |
|---|---|---|
| Statutory redundancy | Up to £30,000 | No, within limit |
| Enhanced/ex gratia | Part of £30,000 cap | Balance over £30k is taxable |
| Notice pay (PILON) | No | Always taxable |
| Accrued holiday pay | No | Always taxable |
Watch out for the “Post-Employment Notice Pay” (PENP) calculation—this ensures tax is always deducted for any unworked notice.
Tax treatment of enhanced redundancy pay and settlement agreements
Enhanced redundancy payments and sums in settlement agreements are tax-free up to the unused part of the £30,000 limit. Any excess amount is taxed. Payments for restrictive covenants or regular earnings are always taxable.
Employers must use PAYE for taxable payments. Your settlement agreement should set out the components and how tax is allocated.
Clear, accurate drafting in your agreement avoids future HMRC disputes. Our solicitors check calculations and negotiate the allocation of sums so you keep the maximum tax-free entitlement.
Emma received £34,000: £8,500 statutory redundancy, £21,500 ex gratia, and £4,000 PILON. The £30,000 (redundancy + ex gratia) was tax-free; £4,000 PILON and £1,500 balance were taxed.
For more, see gov.uk tax rules on redundancy pay.
For tailored advice on redundancy tax, contact our settlement agreement solicitors on 0800 054 1144 or book your settlement agreement advice online. Your appointment is free as your employer pays our fee.
Key clauses and risks in redundancy settlement agreements: What to check before signing
Settlement agreements are legally binding contracts. Key points to check include:
- Exact payment breakdown (statutory, enhanced, notice, holiday)
- Clarity on which claims you are waiving
- Treatment of notice (worked or PILON)
- Confidentiality clauses and what they cover
- Non-derogatory statement expectations to protect your reputation
- Tax indemnity clauses and who will be responsible if HMRC disputes the tax treatment
- Agreed reference wording
Risks include waiving valid claims by mistake, unclear payment or tax wordings, and restrictive covenants that could affect your next job.
Ask our solicitors to check the impact of restrictions and confidentiality terms—non-compete clauses can often be narrowed, and an agreed reference may be added.
Read our full guide on settlement agreement advice.
Restrictive covenants, confidentiality, references, and tax indemnities
Restrictive covenants may prevent you from joining competitors or approaching former clients. Confidentiality clauses stop you discussing the settlement details, and non-derogatory clauses protect reputations (these are often mutual).
References can be negotiated—agreed wording or a requirement to provide one is common. Tax indemnity clauses shift risk to you if HMRC challenges the tax split; our solicitors will advise on whether this is fair or can be improved.
Jason’s settlement agreement included an 18-month non-compete restriction. Our solicitors reduced this to 6 months and secured mutual protection against negative remarks.
Step-by-step: How to sign your settlement agreement and secure your redundancy payment
To finalise your redundancy and receive your statutory or enhanced redundancy payment:
- Receive the draft settlement agreement from your employer.
- Arrange your legal advice—book ILA online for a remote, same-day consultation.
- Our solicitors review the offer, explain the terms, and negotiate if needed.
- Once ready, both you and your employer sign; our solicitor provides the adviser’s certificate required by s.203 ERA 1996.
- Return signed documents (usually by email).
- Your employer processes all payments—redundancy, notice, holiday, discretionary sums—direcly to your bank, normally within 7–14 days.
Keep all signed paperwork securely. If payment is delayed, seek legal assistance quickly.
Carefully review your final payment schedule with our solicitors—mistakes in holiday, notice, or bonus payments are common. We help resolve these before you commit.
Why Choose Settlement Agreement Lawyers?
Settlement Agreement Lawyers specialise in settlement agreements, redundancy exits, and negotiating enhanced redundancy packages for employees across England and Wales. Our solicitors are SRA-regulated, provide clear, expert advice remotely, and often turn around cases the same day.
We have secured millions in redundancy and ex gratia payments for employees—from large collective redundancies to individual exits. Your employer pays our fee, so our service is free to you. We explain your options in plain English, negotiate robustly, and provide practical solutions.
Each client receives tailored advice—whether on statutory redundancy payment, maximising an enhanced deal, or tackling restrictions or tax concerns.
Our Client Success Stories feature employees who doubled their redundancy pay, secured agreed references, and resolved difficult tax issues—all at no cost to them.
Get cost-free legal advice from experienced settlement agreement solicitors—book your appointment here or call 0800 054 1144.
Frequently Asked Questions About Statutory Redundancy Payment
How much statutory redundancy pay am I entitled to?
Your statutory redundancy pay is based on your age, years of continuous service (maximum 20), and weekly pay (subject to the legal cap). Employers follow a fixed formula set in law. Use our Redundancy Calculator for an instant estimate.
What if I don’t qualify for statutory redundancy pay?
If you have less than two years’ continuous service or are not classed as an employee, you will not receive statutory redundancy pay. You may still have rights to notice, accrued holiday, or to challenge an unfair or discriminatory process.
How do I claim statutory redundancy payment if my employer is insolvent?
If your employer cannot pay due to insolvency, claim your unpaid statutory redundancy pay from the government Redundancy Payments Service. You will be paid directly, usually within about six weeks. Find out more at gov.uk redundancy payment claims.
What is the difference between statutory and enhanced redundancy pay?
Statutory redundancy pay is the minimum required by law. Enhanced redundancy pay is any extra offered by your employer, either by policy, contract, or settlement agreement, and is usually higher.
Is redundancy pay affected by alternative employment offers?
You may lose your right to statutory redundancy pay if you unreasonably refuse a suitable alternative job from your employer. The offer must be made before your contract ends and start within four weeks of your redundancy.
Do I pay tax on statutory redundancy pay?
Statutory redundancy pay is tax-free up to £30,000. If total redundancy-related payments exceed this limit, you pay tax (and sometimes NICs) on the excess. Notice pay and holiday pay are always subject to tax and NICs.
Can settlement agreements include higher redundancy payments?
Yes, settlement agreements often include enhanced or ex gratia redundancy payments above the statutory minimum. Our solicitors help you negotiate these amounts and explain their tax status.
What happens if my employer refuses to pay my redundancy entitlement?
If your employer fails to pay your statutory redundancy pay, you can bring a claim in the Employment Tribunal within six months. If your employer is insolvent, you can apply to the government for payment. Prompt legal action is essential—contact us for assistance.
Secure Your Statutory Redundancy Payment With Expert Legal Guidance
Understanding your statutory redundancy payment rights and how they are calculated is essential if you are facing redundancy. This guide has covered eligibility, payment formulas, tax rules, distinctions between statutory and enhanced redundancy pay, and why independent legal advice is vital for any settlement agreement. With factors like continuous service, age bands, pay caps, tax, and the scope for negotiation, please get clear legal advice before you accept any redundancy offer.
Our solicitors are specialists in redundancy and settlement agreements, focused on maximising your statutory or enhanced package and safeguarding your interests. There is no cost to you—your employer pays our fee. Most clients get a same-day remote appointment for expert, plain-English advice.
To review your redundancy package or settlement agreement, call Settlement Agreement Lawyers on 0800 054 1144 now or book your settlement agreement advice online for a confidential, same-day appointment.
