Redundancy Pay

Statutory Redundancy Pay
 
If an employee is made redundant they may be entitled to a statutory redundancy payment. Redundancy pay is based on an employees age and length of service. An employee must have 2 full years service before they are entitled to statutory redundancy pay. 
 
An employee will be entitled to receive a 'weeks pay' for each qualifying year (based on their age and length of service (see below).
 
A week's pay for the purposes of calculating redundancy is capped at £544.00 as of 6th April 2021 (previously £538.00 per week). This maximum figure changes every year.  Where an employee earns more than the maximum, they will receive their normal weeks pay. 

To calculate the number of weeks pay due, you should use the following amounts: 
  • 0.5 weeks' pay for each full year of service where age during year less than 22
  • 1.0 weeks' pay for each full year of service where age during the year is 22 or above, but less than 41
  • 1.5 weeks' pay for each full year of service where age during the year is 41+
The maximum amount is £16,320.00 as of 6th April 2020 (previously £16,140.00). 
 
You can use the manual Ready Reckoner to work out the number of weeks due based on an employees age. 
 
Important Note: In addition to statutory redundancy pay an employee will be entitled to notice pay (see Notice), although they may be asked to work their notice period. 

Note: A Company may have an enhanced redundancy payment scheme that pays in excess of statutory redundancy.  Please check this as it would override the statutory redundancy payments. 
 
Tip - you can check the current rate on the Government website and use the Government Calculator to work out the number of weeks pay. 
 
 
Note on Notice and Pay In Lieu of Notice
 
The employee’s length of service must be calculated as at the “relevant date”. If the employee works their notice period, this will be the date on which notice of termination expires and the employment comes to an end (i.e. their leaving date).

But the position is different if the employee is not required to work their notice and is paid in lieu of notice (PILON).

In this situation, you must add on the statutory notice they would be due for the purpose of calculating their age and length of service. For example, if an employee has 7 years service, they will be due 7 weeks statutory notice. You therefore need to calculate payments based on 7 weeks added onto the date of redundancy. This could mean that they pass an anniversary for complete years service or age which may affect their statutory redundancy payment.