Redundancy Redundancy pay explained
Redundancy pay is based on age, salary and how long you've worked for your company
Redundancy pay - how to calculate yours
When you're made redundant, the amount you receive will often depend on the generosity of your employer. So while some employers will pay more than they're legally obliged to pay, others will limit your redundancy pay to the statutory redundancy amount.
Enhanced redundancy payments vary between employers, but it's usually based on how old you are, how long you have worked for your company and how much your salary is.
How much statutory redundancy pay am I entitled to?
The amount of statutory redundancy pay you'll get depends on three main factors: how long you have been with your current employer, your age and your weekly pay:
- For each complete year you worked when you were under 22, you'll get half a week's pay
- You'll receive one week's pay for each full year you worked while you were 22 or above, but under 41
- For each complete year you've worked since you turned 41, you'll get 1.5 weeks' pay in statutory redundancy pay
- In each instance, the statutory redundancy payout is based on your salary at the time you're made redundant
Sounds complicated! To make it a bit clearer, here's a worked example of a man of 52 who has worked for the same employer for 13 full years, earning £400 a week.
| Statutory redundancy pay for a man (52) with 13 years' service | |||
|---|---|---|---|
| Age bracket | Full years worked | Salary multiplier | Redundancy pay |
| 41+ | 11 | 1.5 | £6,600 |
| 22 to 40 | 2 | 1 | £800 |
| Total | 13 | n/a | £7,400 |
Limits on statutory redundancy pay
When you're working out your statutory redundancy pay, there are a couple of things you need to be aware of:
- For the purposes of calculating statutory redundancy pay, your pay is capped at £430 a week. Between 1 February 2011 and 31 January 2012, the maximum pay limit was £400 per week.
- Only full years worked are included in the calculation and the maximum period you'll be paid for when calculating statutory redundancy pay is 20 years.
Here's another example, this time of a 46-year-old man who has worked for the same employer for 24 years and who earns £500 a week.
| Statutory redundancy pay for a man (46) with 24 years' service | |||
|---|---|---|---|
| Age bracket | Full years worked | Salary multiplier | Redundancy pay |
| 41+ | 5 | 1.5 | £3,225 [a] |
| 22 to 40 | 15 [b] | 1 | £6,450 [a] |
| Total | 20 | n/a | £9,675 |
Table notes
- Restricted to 15 years, as total working period is limited to 20 years for statutory redundancy pay calculations
- Weekly pay is restricted to £430, rather than the £500 he is actually paid
What if my employer is declared bankrupt?
If your employer is declared insolvent and has failed to pay your redundancy pay, you can apply for a direct payment from the National Insurance Fund.
To do this you must first write to your employer asking for your redundancy pay. If it is still unable to pay you, then you should fill out a RP1 form available from the Insolvency Service.
- If you lose your job, find out which benefits you're entitled to with our guide to redundancy benefits
- Worried about your redundancy rights or pay? - join Which? Legal Service for expert employment advice
- If you're thinking of taking out unemployment insurance, the Which? Money Helpline can help
