Redundancy Pay

MoneyHelper

You might be entitled to statutory redundancy pay if you’ve worked continuously for your employer for at least two years. If you work on a casual basis, or are an agency or temporary worker, you probably won’t qualify for redundancy pay.

Understand what makes up a statutory redundancy payment

How much you’re entitled to depends on how long you’ve been in the job, your age in each year you worked there and your current salary. 

You'll get: 

  • half a week’s pay for each full year you were under 22 
  • one week’s pay for each full year you were 22 or older, but under 41 
  • one and half week’s pay for each full year you were 41 or older

Sadly, you won't be entitled to a payout if you've been working for your employer for less than two years or your employment status means you don’t qualify for one. 

Check your employment contract or staff handbook 

Statutory redundancy pay is the legal minimum. Your employer can’t pay you less than this. But they might have to pay you more if your employment contract says so. This is called ‘contractual redundancy pay’.

This could mean a bigger lump sum or getting a payout, even if you’ve worked there for less than two years. If there’s no mention of redundancy in your contract or staff handbook, assume you’ll get the legal minimum.

Work out your redundancy pay using our calculator

You might receive other lump sum payments in your final pay packet when you’re made redundant. If you’re owed these under your contract of employment (rather than as compensation for losing your job), they will be taxed in the same way as your normal pay.

Payments might include any of the following:

  • wages owing and bonus payments 
  • pay in lieu of notice
  • holiday pay owing.

Use our redundancy pay calculator to find out how much you could get.

Check if you’ll have to pay tax on your redundancy pay

You don’t pay tax on any redundancy pay up to £30,000. If you receive more than £30,000, you’ll have to pay tax at your highest rate on the amount over £30,000.

If you receive any non-cash benefits as part of your redundancy package, like a company car or computer, this will be worked out as a cash value and added to your redundancy pay for tax purposes.

You'll have to pay tax on any pay you get in lieu of notice (PILON). You're responsible for making sure you've paid the right amount of tax.

If your employer can't pay you

If your employer has gone out of business or tell you they can't afford to pay you, the government’s Redundancy Payments Service will pay you the statutory amount instead.

The insolvency firm dealing with your employer should give you a form RP1 to make a claim.

It's important to make sure you claim any benefits you're entitled to because when the Insolvency Service works out your payment they will deduct any Jobseeker's Allowance or Universal Credit that you're eligible for, regardless of whether or not you're claiming these benefits.

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