The Statutory Redundancy Pay Formula
Statutory redundancy pay is calculated using three factors: your age, your length of continuous service, and your weekly pay. The formula applies a multiplier based on age to each complete year of service, subject to a maximum of 20 years and a weekly pay cap (£643 from April 2025).
The multiplier rates are: one and a half weeks pay for each complete year of service in which you were aged 41 or over. One week's pay for each complete year of service in which you were aged between 22 and 40. Half a week's pay for each complete year of service in which you were under 22. The calculation works backwards from the date of dismissal, counting complete years of service year by year and applying the appropriate age multiplier to each.
Example: an employee aged 45 with eight years service, earning £800 gross per week (above the cap, so £643 applies). Four years over 41 at 1.5 weeks each = 6 weeks. Four years between 22 and 40 at 1 week each = 4 weeks. Total = 10 weeks at £643 = £6,430 statutory redundancy pay.
The Six Most Common Employer Errors
First, using the wrong weekly pay figure. Weekly pay for redundancy purposes is calculated on the basis of your normal working hours and the pay attributable to those hours. Overtime, commission, and bonuses may be included depending on whether they are contractually guaranteed. Many employers use basic pay only when the correct figure should be higher. If your pay varies week to week, the weekly pay is calculated as an average of the 12 weeks before your dismissal date in which you were actually paid.
Second, miscounting the years of service. Service must be continuous and complete years only count. A gap in employment, even a short one, may break continuity unless it falls within one of the permitted exceptions (such as a TUPE transfer, maternity leave, or temporary absence by agreement). Check every year has been counted and that no gap has been used to break your continuity incorrectly.
Third, applying the wrong age band to the wrong year. Each complete year of service must be assigned to the age band that applied during that year, not your current age. An employee who is now 42 but was 40 during their second-to-last year of service should have that year calculated at the lower rate, not the higher one. This error typically works in the employer's favour.
Fourth, capping at fewer than 20 years. The maximum qualifying period is 20 complete years. If you have been with your employer for longer, they count only the most recent 20 years -- but they must count all 20 of them. Some employers incorrectly apply a lower cap.
Fifth, failing to include enhanced terms. If your contract, a collective agreement, or a company redundancy policy provides for enhanced redundancy pay above the statutory minimum, that contractual entitlement must be honoured. Some employers apply the statutory formula without checking whether enhanced terms exist. If your offer letter, handbook, or any written policy refers to enhanced redundancy, ask for those terms to be applied.
Sixth, deducting tax incorrectly. The first £30,000 of a redundancy payment is free of income tax. Some employers deduct tax from the entire payment. Check the net figure against the gross figure and the tax treatment applied.
How to Check Your Calculation
Ask your employer for a written breakdown of the calculation showing: the dismissal date, your date of commencement, the years of service counted, the age band applied to each year, the weekly pay figure used, and the resulting total. The GOV.UK redundancy pay calculator at gov.uk/calculate-your-redundancy-pay can be used to verify the statutory minimum. If the figure your employer has calculated is lower than the GOV.UK figure, challenge it in writing.
What to Do If You Have Been Underpaid
Write to your employer setting out the discrepancy, the correct calculation, and the amount owed. Give them a reasonable time to respond -- 14 days is appropriate. If they refuse to correct the error, you can bring a claim to the employment tribunal for the shortfall. Redundancy pay claims can be brought up to six months from the date of dismissal. The claim is straightforward -- the tribunal will calculate the correct amount and order payment of the difference. You do not need two years service to claim statutory redundancy pay owed to you. You need only to have been made redundant after two years of continuous service and to have been underpaid.