What is Statutory Redundancy Pay?

Statutory redundancy pay is a legal entitlement for employees who are made redundant, acknowledging their service and helping them during the transition to new employment. It is distinct from any additional payments or packages that employers may choose to provide.

Employees will normally be entitled to statutory redundancy pay if they’ve been working for you for 2 years or more.

They’ll get:

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

The length of service is capped at 20 years.

The weekly pay is the average they earned per week over the 12 weeks before the day they receive their redundancy notice.

Key Components of Statutory Redundancy Pay:

Length of Service: The amount of statutory redundancy pay is primarily determined by an employee’s length of continuous service with the employer. For each full year of service, a specific multiplier is applied to the employee’s weekly gross pay.
Weekly Gross Pay: The weekly gross pay used in the redundancy calculation is subject to a statutory cap. As of today, this cap is £643. However, it’s essential to check for any updates or changes to this figure at this location as it usually changes yearly.
Age of the Employee: An employee’s age also influences the calculation. For those under the age of 22, a lower multiplier is applied, while employees aged 41 and above receive a higher multiplier.

Step-by-Step Calculation:

Step 1: Determine Length of Service Identify the total number of complete years the employee has been continuously employed by the company.

Step 2: Age Factor Apply the appropriate age factor based on the employee’s age at the time of redundancy.

Step 3: Weekly Gross Pay Determine the employee’s weekly gross pay, considering the statutory cap.

Step 4: Calculate Statutory Redundancy Pay Multiply the length of service by the age factor and the weekly gross pay. The final figure represents the statutory redundancy pay entitlement.

Example Calculation

Let’s consider an employee aged 35, with 5 years of continuous service, and a weekly gross pay of £500.

Length of Service Factor: 5 years
Age Factor (for 35-year-old): 1
Weekly Gross Pay: £500

Calculation: 5 years x 1.0 x £500 = £2,500

If you are doing this calculation for multiple employees then I recommend using my redundancy calculator