Redundancy Pay UK: Statutory vs Enhanced

Redundancy pay splits into two tiers: the statutory minimum, worth up to £22,530 under the Employment Rights (Increase of Limits) Order 2026 (SI 2026/310), and any enhanced amount an employer chooses to pay on top. Here is how the two differ, and how the process and tax rules work.

What Is Statutory Redundancy Pay

Statutory redundancy pay is the legal minimum an employer must pay an employee with at least 2 years' continuous service who is dismissed for genuine redundancy. It is calculated using age-banded weeks for each full year of service: 0.5 week for each year worked under age 22, 1.0 week for each year aged 22 to 40, and 1.5 weeks for each year aged 41 or over. Length of service is capped at 20 years, and from 6 April 2026 a week's pay for this purpose is capped at £751 under SI 2026/310, giving a maximum possible payment of £22,530. For the full formula, age-band table and worked examples, see statutory redundancy pay.

Our redundancy pay calculator gives a quick estimate of the statutory amount from your age, years of service and weekly pay.

What Is Enhanced (Contractual) Redundancy Pay

Enhanced, or contractual, redundancy pay is anything an employer pays above the statutory minimum. There is no fixed formula: an employer might offer more weeks per year of service, remove the 20-year service cap, drop the £751 weekly cap in favour of an employee's actual salary, or simply add a lump sum on top of the statutory figure. Enhanced terms come from an employment contract, a staff handbook, a collective agreement negotiated with a trade union, or an individual settlement agreement offered during the redundancy process. Unlike statutory redundancy pay, there is no automatic legal right to an enhanced payment unless it has been promised in writing or has become an established custom and practice at the organisation, so it is worth checking a contract and any staff handbook before assuming only the statutory minimum applies.

Statutory vs Enhanced Redundancy Pay

Is Redundancy Pay Taxed

Redundancy pay, statutory and enhanced amounts combined, is tax-free up to £30,000. Any amount above £30,000 is subject to income tax. You do not pay National Insurance on the redundancy payment itself; instead, your employer pays employer Class 1A National Insurance on the amount above £30,000. This £30,000 threshold covers the redundancy payment itself; it does not extend to other sums often paid alongside it. Notice pay, including any payment in lieu of notice, and accrued but untaken holiday pay are earnings rather than redundancy pay, and are taxed and subject to National Insurance as normal through payroll. A payslip should show redundancy pay separately from notice pay and holiday pay, so it is clear which parts fall inside the £30,000 tax-free allowance and which are taxed as ordinary income.

The Redundancy Process

A fair redundancy process generally follows the same sequence whether the final payment is statutory or enhanced. An employer should explain why the role is at risk, apply fair and objective selection criteria where several employees could be affected, consult individually before confirming any dismissal, and give the correct notice period. The typical stages are:

• Warning staff that redundancies may be needed and explaining the business reason
• Applying fair, objective selection criteria when selecting from a pool of employees
• Holding individual consultation meetings, with a genuine chance to respond and suggest alternatives such as redeployment
• Confirming the decision in writing, with the redundancy payment calculation and notice period
• Giving notice, or pay in lieu of notice, under section 86 of the Employment Rights Act 1996 (see notice periods)
• Offering suitable alternative employment where it exists

Skipping these steps can turn what would otherwise be a genuine redundancy into an unfair dismissal.

If you want to check the notice period alongside the redundancy pay, our notice period calculator works out the statutory minimum for both an employer and an employee.

Collective Consultation for Larger Redundancies

Where an employer proposes to make 20 or more employees redundant at one establishment within a 90-day period, additional collective consultation duties apply on top of individual consultation. The employer must consult with recognised trade union representatives or elected employee representatives, and consultation must begin before any dismissal notices are issued. The minimum consultation period is:

• 30 days before the first dismissal takes effect, where 20 to 99 redundancies are proposed
• 45 days before the first dismissal takes effect, where 100 or more redundancies are proposed

Consulting late, or not at all, can expose an employer to a claim at the employment tribunal, in addition to any redundancy pay owed to affected employees. Full guidance on running this process sits with ACAS.

Northern Ireland

Northern Ireland has its own redundancy legislation, separate from the Employment Rights Act 1996, with limits set by the Department for the Economy rather than Westminster. NI's figures are set independently and are currently higher than the Great Britain figures described here: a week's pay is capped at £783 and the maximum statutory redundancy payment is £23,490, against £751 and £22,530 in Great Britain. Always use the NI figures for an NI redundancy and check nidirect.gov.uk for the current limits. Redundancy disputes in Northern Ireland go to the Industrial Tribunal, not the Employment Tribunal used in Great Britain, and the advice and conciliation body is the Labour Relations Agency (LRA) rather than ACAS.

This article provides general information about redundancy pay in Great Britain and is not legal advice. Whether a redundancy is genuine, whether consultation was adequate, and what an individual contract or policy provides can all affect the outcome, so anyone facing redundancy should check their contract and consider independent advice from ACAS, Citizens Advice, or a solicitor. For the full picture of UK employment rights, see the UK Employment Law hub and the United Kingdom hub.

Frequently Asked Questions

What is the difference between statutory and enhanced redundancy pay?

Statutory redundancy pay is the legal minimum, calculated with age-banded weeks, a 20-year service cap and a £751 weekly pay cap. Enhanced (contractual) redundancy pay is anything an employer pays above that minimum, set by contract or policy rather than by law.

Is redundancy pay taxable in the UK?

Statutory and enhanced redundancy pay combined is tax-free up to £30,000. Amounts above £30,000 are generally taxable. Notice pay and accrued holiday pay are separate from the redundancy payment and are taxed as normal earnings.

How much statutory redundancy pay am I entitled to?

It depends on your age during each year of service, your length of service (capped at 20 years) and your week's pay (capped at £751 from 6 April 2026). See the statutory redundancy pay page for the full formula and worked examples, or use the redundancy pay calculator for an estimate.

Do I have to accept an alternative job to keep my redundancy pay?

An employee who unreasonably refuses a genuinely suitable alternative role offered by the same employer can lose their entitlement to statutory redundancy pay. Whether a role is suitable and a refusal unreasonable depends on the individual circumstances.

What is collective consultation and when is it required?

Collective consultation applies when an employer proposes 20 or more redundancies at one establishment within 90 days. It requires consulting employee or trade union representatives for a minimum of 30 days before the first dismissal, or 45 days where 100 or more redundancies are proposed.

Can I get both statutory and enhanced redundancy pay?

Yes. Enhanced redundancy pay is typically the statutory amount plus a further contractual top-up, rather than a separate payment. The combined total is tax-free up to £30,000.

Is enhanced redundancy pay guaranteed?

No. Unlike statutory redundancy pay, there is no automatic legal right to an enhanced payment. It applies only where promised in a contract, staff handbook, collective agreement, or established workplace custom and practice.

What can I do if my employer will not pay my redundancy pay?

Raise it with your employer in writing first. If that does not resolve it, contact ACAS, which can offer early conciliation, and consider a claim to the employment tribunal. The deadline for this claim has always been 6 months, even while many other tribunal claims had a 3-month limit. Under section 164 of the Employment Rights Act 1996, you keep your right to statutory redundancy pay if, within 6 months of the relevant date (usually the day your job ended), you make a written claim to your employer or refer the claim to a tribunal. A tribunal can allow a claim made in the following 6 months if it is just and equitable. In Northern Ireland, claims for unpaid redundancy pay must also be made within 6 months of your job ending, and go to an Industrial Tribunal.