Statutory redundancy pay

Produced by a Tolley Personal Tax expert

Personal Tax

Guidance

Redundancy payments fall into two categories: statutory payments and non-statutory payments.

Statutory redundancy is the amount which must be paid by the employer to the employee under employment law and is a fixed amount for each year of service. Statutory redundancy pay is usually exempt from tax (see below).

Non-statutory redundancy payments are any other payment made by the employer to the employee on redundancy. The tax treatment of these payments is discussed in the How could a termination payment be taxed? guidance note.

Employment law obligations

An employee is entitled to a statutory redundancy payment if they are made redundant after being continuously employed by the employer for at least two years.

The statutory redundancy payment is calculated by reference to the employee’s age, length of service and gross weekly pay. The amount of a week’s pay is subject to a statutory maximum cap which is reviewed each year. For payments made between 6 April 2024 and 5 April 2025, the maximum amount of a week’s pay is £700. Length of service is capped at 20 years.

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