How Do I Work Out My Redundancy Pay in the UK?
How Do I Work Out My Redundancy Pay in the UK?
Being made redundant can be stressful, but understanding your financial entitlements can help you plan your next steps with confidence. In the UK, redundancy pay is calculated based on your age, length of service, and weekly earnings. This guide will walk you through how to calculate your redundancy pay and what additional payments you may be entitled to.
1. Understanding Statutory Redundancy Pay
Who Qualifies?
To be eligible for statutory redundancy pay, you must:
- Be an employee (rather than self-employed or a contractor).
- Have worked continuously for your employer for at least two years.
- Be made redundant rather than dismissed for misconduct or other reasons.
How is Statutory Redundancy Pay Calculated?
The amount you receive depends on three key factors:
1️⃣ Your Age
- Under 22 – 0.5 week’s pay per full year of service.
- Aged 22-40 – 1 week’s pay per full year of service.
- Aged 41 and over – 1.5 week’s pay per full year of service.
2️⃣ Your Length of Service
- Only complete years of service count.
- A maximum of 20 years can be used in the calculation.
3️⃣ Your Weekly Pay
- This is based on your gross (before tax) weekly earnings, capped at £644 per week (as of 2024/25).
How to Work Out Your Average Weekly Earnings
If you work full-time with a fixed salary, your weekly pay is typically:
- Annual salary ÷ 52 weeks
If you work variable hours, your average weekly pay is calculated based on your earnings over the previous 12 weeks before your redundancy date, excluding any unpaid weeks. The formula is:
- Total earnings over the last 12 weeks ÷ 12
📌 Note: If you were on furlough or sick leave, your pay should be based on your usual earnings, not the reduced amount.
Example Calculation
If you are 45 years old, earning £700 per week (but capped at £644), and have worked for 10 years, your redundancy pay is calculated as follows:
- 6 years at 1 week’s pay = 6 weeks
- 4 years at 1.5 weeks’ pay = 6 weeks
- Total = 12 weeks’ pay
- 12 x £644 = £7,728 statutory redundancy pay
📌 Note: Your employer may offer enhanced redundancy pay, which can be higher than the statutory minimum. Always check your employment contract.
2. Additional Payments You May Be Entitled To
Unused Holiday Reimbursement (Taxable) 🏖️
If you haven’t used all your annual leave before your redundancy date, you’re entitled to be paid for the unused holiday. This is calculated as:
- (Annual holiday entitlement / 12) × months worked minus any holiday already taken.
- This payment is subject to tax and National Insurance (NI).
Payment in Lieu of Notice (PILON) (Taxable) 📅
If your employer does not require you to work your notice period, you should receive payment in lieu of notice (PILON).
- Your notice period depends on your length of service:
- 1 month – 2 years = 1 week’s notice.
- 2–12 years = 1 week per year of service.
- 12+ years = 12 weeks’ notice.
- PILON is subject to tax and NI deductions.
Final Wages & Other Benefits 💰
- Any outstanding wages should be paid as normal.
- If you receive bonuses, commissions, or other contractual payments, check your contract to see if they are included.
3. How to Get Your Redundancy Pay
- Employers should pay redundancy within your final payslip or within six weeks of your redundancy date.
- If you do not receive your redundancy pay, you can make a claim to an employment tribunal within six months.
What If My Employer Can’t Pay?
If your employer is insolvent, you can apply for redundancy pay through the UK government’s Redundancy Payments Service.
4. Quick Calculation Method
Want a quick estimate? Use this Calculate My Redundancy – Downloadable excel tool, which automatically calculates:
✅ Statutory Redundancy Pay
✅ Unused Holiday Pay (taxable)
✅ Payment in Lieu of Notice (taxable)
Screenshot
Video Demo
5. Next Steps
🔍 Check your employment contract for any enhanced redundancy terms.
📞 Seek advice from ACAS or Citizens Advice if you have concerns about your redundancy rights.
💼 Start planning your next steps, whether it’s job hunting, retraining, or financial planning.
Final Thoughts
Understanding how your redundancy pay is calculated helps you take control of your finances and plan your future with confidence. If you’re unsure, seek professional advice to ensure you receive everything you’re entitled to.
