Redundancy pay

The statutory redundancy payment scheme aims to ensure that people who are dismissed through no fault of their own receive compensation.  Employees who meet certain requirements are statutorily entitled to a lump sum from their employer. 

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Eligibility

To be entitled to receive a statutory redundancy payment, an individual must:

  • be an employee working under a contract of employment;
  • have at least two years of continuous service; and
  • have been dismissed, laid off or put on short-time working (and have a qualifying period of lay off).

When issuing redundancy pay, an employer must provide a statement showing how it was calculated. 

Rates

The amount payable is dependent upon age, length of service and contractual earnings.

  • Up to the age of 21:  half a week’s pay for each completed year of service;
  • 22 to 40 years of age:  one week’s pay for each completed year of service;
  • 41+ years of age:  one-and-a-half weeks’ pay for each completed year of service.

Limits

The calculation for weekly pay is subject to the statutory limit of £547 (6 April 2019).  This is reviewed annually. 

The maximum number of years that can be taken into account in a redundancy payment calculation is 20. 

More detailed information for employers and employees can be found in the links section below. 

Last updated: 23 September 2019