Making a role redundant is one of the harder decisions a small business owner has to make, and getting the pay calculation wrong can turn into an employment tribunal claim. This guide covers the current 2026/27 statutory redundancy pay rules, how the calculation actually works, and what employers need to get right.
Quick Answer
Statutory redundancy pay is based on age, length of service and weekly pay, capped at £751 a week for 2026/27. Employees get half a week’s pay per full year worked under 22, one week’s pay per full year aged 22 to 40, and one and a half weeks’ pay per full year aged 41 or over, up to a maximum of 20 years’ service. The maximum possible statutory redundancy payment is £22,530.
Who Qualifies for Statutory Redundancy Pay?
An employee qualifies if they are being made redundant, have at least 2 years of continuous service with you, and are a genuine employee rather than a contractor or agency worker. An employee does not qualify if they resign, are dismissed for misconduct, or unreasonably refuse a genuine offer of suitable alternative employment.
How Statutory Redundancy Pay Is Calculated
| Age During That Year of Service | Weeks’ Pay per Full Year |
|---|---|
| Under 22 | 0.5 week |
| 22 to 40 | 1.0 week |
| 41 and over | 1.5 weeks |
Service is capped at 20 years, and only complete years count. A week’s pay is the employee’s average gross weekly earnings over the 12 weeks before the redundancy notice was given, capped at £751 for 2026/27 even if their actual pay is higher.
2026/27 Rates at a Glance
| Figure | 2026/27 Amount |
|---|---|
| Weekly pay cap (England, Scotland, Wales) | £751 |
| Weekly pay cap (Northern Ireland) | £783 |
| Maximum statutory redundancy pay | £22,530 |
| Tax-free threshold | First £30,000 combined with other termination payments |
The relevant date for which cap applies is the effective date of dismissal, not the date notice was given. A redundancy that completes on or after 6 April 2026 uses the £751 cap, even if notice was served in March.
Worked Example
An employee aged 45 with 10 years of service and average weekly pay of £900 has their pay capped at £751 for the calculation. All 10 years fall in the 41-and-over band at 1.5 weeks each, giving 15 weeks in total. Statutory redundancy pay is 15 multiplied by £751, which comes to £11,265.
Is Redundancy Pay Taxable?
Statutory redundancy pay, combined with any additional contractual redundancy pay, is tax-free up to £30,000. Amounts above £30,000 are subject to Income Tax and Class 1A National Insurance. Notice pay, including any payment in lieu of notice, and accrued holiday pay are treated as normal earnings and are always taxable, regardless of the £30,000 threshold.
Statutory vs Enhanced Redundancy Pay
Statutory redundancy pay is the legal minimum. Many employers offer enhanced redundancy pay on top, either as a matter of policy or through individual negotiation, though there is no legal requirement to do so beyond the statutory figure. Enhanced payments are typically more generous multiples of weekly pay, or an uncapped weekly figure, and still count towards the same £30,000 tax-free threshold when combined with the statutory amount.
The Redundancy Process: What Employers Must Do
- Identify a genuine business reason for redundancy, such as reduced need for the role, not a way to remove a specific individual
- Consult with affected employees, individually for small numbers, or collectively if 20 or more redundancies are proposed at one establishment within 90 days
- Use a fair, objective selection process if selecting from a pool of employees
- Consider suitable alternative employment within the business before confirming redundancy
- Give the correct statutory or contractual notice period
- Calculate and pay statutory redundancy pay correctly and on time
Getting the selection and consultation process wrong is a more common source of tribunal claims than the pay calculation itself. If you are closing the business entirely rather than restructuring, our guide to how to close a limited company covers the wider obligations that come with winding down, including employee redundancy.
Collective Redundancy Consultation
If you propose to make 20 or more employees redundant at one establishment within a 90-day period, you must consult collectively with recognised trade unions or elected employee representatives, and notify the Redundancy Payments Service using form HR1. Consultation must begin at least 30 days before the first dismissal takes effect, or 45 days if 100 or more redundancies are proposed. Failing to consult correctly can result in a protective award of up to 90 days’ pay per affected employee.
Small Employers and Redundancy Pay
There is no exemption for small businesses. Even a company with a single employee must pay statutory redundancy pay if that employee qualifies, and there is no government fund that automatically reimburses the employer, except where the employer is insolvent and cannot pay, in which case the employee can claim directly from the Insolvency Service.
Frequently Asked Questions
What is the redundancy pay cap for 2026/27?
£751 a week in England, Scotland and Wales, and £783 a week in Northern Ireland, giving a maximum statutory redundancy payment of £22,530.
How many years of service do you need for redundancy pay?
At least 2 continuous years of service with the employer.
Is statutory redundancy pay taxable?
The first £30,000, combined with any other termination payments, is tax-free. Amounts above that are subject to Income Tax and Class 1A National Insurance.
Can an employer refuse to pay statutory redundancy pay?
No, if the employee qualifies. An employee can claim through an employment tribunal if it is not paid, and can claim from the Insolvency Service if the employer is insolvent.
Do you need to consult employees before redundancy?
Yes. Individual consultation is expected for any redundancy, and formal collective consultation is a legal requirement if 20 or more redundancies are proposed at one establishment within 90 days.
Key Takeaways
- The weekly pay cap for 2026/27 is £751, giving a maximum statutory payment of £22,530
- Pay is calculated by age band: 0.5, 1.0 or 1.5 weeks per full year of service, capped at 20 years
- Employees need at least 2 years of continuous service to qualify
- The first £30,000 of redundancy pay is tax-free; notice and holiday pay are always taxable
- Collective consultation is required for 20 or more redundancies within 90 days
About the Author
This guide was prepared by the Business Mine editorial team, who research and write practical UK business, tax and finance guides. Information is checked against current gov.uk and employment law guidance at the time of publication. This article is provided for general information only and does not constitute legal advice; for advice specific to your circumstances, consult a qualified employment adviser.
