UK Statutory Redundancy Pay Rates 2026/27

The statutory redundancy pay formula

Statutory redundancy pay is set by section 162 of the Employment Rights Act 1996. It reckons backwards from the date your employment ends, allowing one "appropriate amount" of weekly pay for each full year of continuous service, banded by the age you held during that year of service.

Only whole years of continuous service count, and a maximum of 20 years can be used — service beyond that does not add anything further. Weekly pay is your normal week's pay before tax, averaged over the 12 weeks before the redundancy notice if your pay varies, and is itself capped (see below).

The weekly pay cap and the maximum payment

Whatever your actual weekly pay, only up to £751 a week counts toward a statutory redundancy calculation for redundancies on or after 6 April 2026 (Employment Rights Act 1996, section 227(1)). Combined with the 20-year service cap and the 1.5-week multiplier for workers aged 41 and over, that sets an absolute ceiling of £22,530 (20 years × 1.5 × £751) on the statutory entitlement — enhanced or contractual redundancy schemes can pay more, but the legal minimum tops out here.

Use the cap that applied on the date your employer gave you notice of redundancy, not today's cap, if you were made redundant in an earlier tax year.

The two-year qualifying service rule

Section 155 of the Employment Rights Act 1996 sets the entry test: you have no right to a statutory redundancy payment at all unless you have been continuously employed for two years or more, ending with the date your employment ends. There is no sliding scale below two years — someone made redundant after 23 months' service gets nothing under this scheme, whatever their age or how long they were given notice.

The two-year rule applies only to the statutory minimum. Your employer's own contractual or enhanced redundancy scheme can set a shorter qualifying period, or none at all — check your contract or staff handbook rather than assuming the statutory threshold is the only one that applies to you.

The £30,000 tax-free threshold and PENP

Section 403 of the Income Tax (Earnings and Pensions) Act 2003 exempts the first £30,000 of a qualifying termination payment from income tax. This covers statutory redundancy pay, any enhanced or contractual redundancy pay above the statutory minimum, and ex-gratia payments made because of the redundancy. Amounts above £30,000 are taxed as income at your marginal rate, but no employee National Insurance is charged on any part of a qualifying termination payment, even the taxable excess.

Post-Employment Notice Pay (PENP), introduced by section 402D ITEPA 2003 with effect from 6 April 2018, sits in front of that exemption. PENP is calculated as (BP × D) / P − T, where BP is basic pay for the last pay period before the termination, D is the number of days in the unworked notice period, P is the number of days in that pay period, and T is any amount already taxed as earnings for the unworked notice. Whatever PENP works out to is taxed in full as earnings — with employee and employer Class 1 National Insurance due on it — regardless of whether the employment contract has a PILON clause. Only the remainder of the termination payment, after PENP is deducted, is a "relevant termination award" that can benefit from the £30,000 exemption. In practice this means notice pay is always taxed as earnings first; the £30,000 exemption only ever applies to what is left over.

Unlike the weekly pay cap, the £30,000 threshold is not part of the annual Increase of Limits uprating below — it has been fixed at £30,000 since 1988 and is not linked to inflation.

The annual 6 April uprating

The weekly pay cap is uprated most years by an Employment Rights (Increase of Limits) Order, made by the Secretary of State under section 34 of the Employment Relations Act 1999. Section 34(2) requires the change to track the Retail Prices Index (RPI): if RPI for September of one year is higher (or lower) than RPI for the previous September, the specified limits — including the section 227(1) redundancy pay cap — are changed by that percentage, effective from the following 6 April. Each new Order revokes and replaces the previous year's Order, and transitional provisions preserve the old limit for anyone whose redundancy or dismissal falls before the new Order takes effect.

Northern Ireland: a separate, higher cap

Redundancy pay in Northern Ireland is governed by a separate statute — the Employment Rights (Northern Ireland) Order 1996 — rather than the Employment Rights Act 1996 that applies in England, Wales and Scotland. The age-band formula (0.5 / 1 / 1.5 weeks), the two-year qualifying period and the 20-year service cap are identical. So is the £30,000 tax-free threshold, because income tax is not devolved and ITEPA 2003 applies UK-wide.

What differs is the weekly pay cap. The Department for the Economy uprates the Article 23(1) limit each 6 April under its own Employment Rights (Increase of Limits) Order (Northern Ireland), tracking the same RPI methodology but calculated and made separately from the Great Britain Order — so the two figures can, and currently do, differ.

For 2026-27 the Northern Ireland cap is £783, £32 higher than the £751 cap in Great Britain, giving a maximum statutory redundancy payment in Northern Ireland of £23,490 (20 years × 1.5 × £783) against £22,530 in England, Wales and Scotland.

Frequently asked questions