Statutory Redundancy Pay in 2026: How Much to Pay and How to Do It Fairly

Making someone redundant is one of the hardest decisions a small business owner faces, and the paperwork has to be right as well as the conversation. This guide explains statutory redundancy pay in 2026 for employers in England, Scotland and Wales: who qualifies, how the age bands and the £751 weekly cap work, worked examples in pounds, how much notice to give, when you must consult, the tax-free £30,000, and the Employment Rights Act 2025 changes that raised the stakes for getting consultation wrong. Northern Ireland uses different figures, covered below.

Quick answer

Employees with two years' continuous service who are made redundant get statutory redundancy pay: half a week's pay for each full year under age 22, one week's pay for each year aged 22–40, and one and a half weeks' pay for each year aged 41 or over. Service counts up to 20 years and a week's pay is capped at £751 for redundancies on or after 6 April 2026, so the maximum is £22,530.

• Up to £30,000 of redundancy pay is tax-free

• Weekly pay is normal gross pay, or the 12-week average if pay varies

• Collective consultation applies at 20+ redundancies at one establishment in 90 days

• Failing to consult can now cost up to 180 days' pay per employee

• Employees have 6 months to claim if you don't pay

What counts as a genuine redundancy

Redundancy is a dismissal because you no longer need anyone to do a particular job, or need fewer people to do it. It usually happens because the business is closing, moving to a new location, or changing what it does or how it does it — new machinery that replaces a role, for example. The job has to disappear; replacing the person with someone else on the same work isn't redundancy, and a tribunal will see through it.

Before you get to redundancy pay, the law expects you to look for alternatives. GOV.UK lists the usual ones: asking for volunteers, offering early retirement, ending contracts with freelancers and agency staff, cutting overtime, freezing recruitment, moving people into vacancies, and using lay-offs or short-time working if contracts allow it. You don't have to use all of them, but you should be able to show you thought about them.

Redundancy is also a potentially fair reason for dismissal. That matters more from 1 January 2027, when the qualifying period for ordinary unfair dismissal protection falls from two years to 6 months for dismissals on or after that date, and the cap on compensatory awards is removed. After that, anyone with six months' service you make redundant can challenge whether the process was fair, even though they won't get statutory redundancy pay until they reach two years.

Who qualifies for statutory redundancy pay

To be entitled, a person must:

• be an employee with a contract of employment — workers such as most casual, agency and zero-hours staff don't qualify;
• have at least two years' continuous service with you at the relevant date;
• have been dismissed because of redundancy, or have been laid off or put on short-time working long enough to claim (see below).

People who choose early retirement don't qualify. Nor do employees who refuse a suitable alternative job without good reason, or who are dismissed for misconduct. A few groups are excluded by law, including Crown servants, the armed forces and police, share fishermen, and domestic servants who are members of the employer's immediate family.

You can always pay more than the statutory minimum, or pay staff with less than two years' service. Many employers do this through a contractual or discretionary scheme, which must be applied consistently to avoid discrimination claims.

Redundancy pay limits (from 6 April 2026)

£751

Maximum week's pay

Was £719

£22,530

Maximum statutory payment

30 weeks × the cap

20 years

Service that counts

£30,000

Tax-free limit

All redundancy payments combined

How statutory redundancy pay is calculated

Three things decide the payment: the employee's age, their length of continuous service, and their weekly pay. Count backwards from the relevant date, usually the day employment ends, taking only full years of service, and apply the multiplier for the age the employee was during each year:

Only the most recent 20 years count, which is why the most anyone can get is 30 weeks' pay (20 years × 1.5) — £22,530 at the current cap.

What a week's pay means

For employees with normal working hours and fixed pay, a week's pay is their normal gross weekly pay — before tax and other deductions — including any guaranteed overtime that the contract requires you to offer and them to work, and any contractual bonus or commission. For people whose pay varies with their hours, use the average over the 12 weeks before the day they received their redundancy notice. Either way, cap the result at £751.

If the employee is on maternity, paternity, adoption, shared parental or other family-related leave when they're made redundant, base the calculation on their normal contractual pay, not the statutory pay they're receiving. Pay reduced by short-time working shouldn't be used either.

Pay in lieu of notice can add a year

Service is measured to the relevant date. If you pay in lieu of notice, the relevant date is pushed back to when statutory notice would have ended had it been worked. Acas gives the example of an employee with eight years and 11 months' service who is entitled to eight weeks' statutory notice: paid in lieu, the eight weeks take them past nine years, so you must pay for nine years, not eight. Always check whether notice tips someone over a service anniversary.

Show redundancy pay on a final payslipFree, no login — list redundancy pay, notice pay and holiday pay as separate lines.

Worked examples in pounds

These use the 2026-27 cap. Names are illustrative.

1. Mid-career warehouse supervisor. Dave is 45 and has worked for you for 15 full years, earning £600 a week. Counting back, he was 41 or over for four of those years (ages 41 to 44) and 30 to 40 for the other 11. That's 4 × 1.5 + 11 × 1 = 17 weeks. His pay is under the cap, so his redundancy pay is 17 × £600 = £10,200.

2. Long-serving manager over the cap. Margaret is 62 with 25 years' service and earns £900 a week. Only the last 20 years count, all of them after her 41st birthday, so she gets 20 × 1.5 = 30 weeks. Her pay is capped at £751, giving 30 × £751 = £22,530, the statutory maximum. You could pay more under a contractual scheme.

3. Young employee. Liam is 24 with five full years' service at £450 a week. Three of those years were under 22 (ages 19, 20 and 21) and two were at 22 and 23. That's 3 × 0.5 + 2 × 1 = 3.5 weeks, so £1,575.

4. Variable hours. Aisha works irregular shifts at £13 an hour. Over the 12 weeks before her notice she worked 360 hours, earning £4,680, so her average weekly pay is £390. She's 33 with six years' service, all after age 22: 6 weeks × £390 = £2,340.

On top of redundancy pay, each employee is owed their final wages, any accrued but untaken holiday, and notice pay. The holiday entitlement guide explains how to calculate holiday owed on leaving.

Notice periods and notice pay

Once consultation is over, you must give each employee at least their statutory notice, or their contractual notice if that's longer:

Notice pay is based on the employee's average weekly pay over the 12 weeks before the notice period starts, and isn't capped. If the contract has a payment in lieu of notice clause, you can end employment straight away and pay for the notice period instead, but you must still pay the basic pay they would have earned, plus pension and any other contractual benefits for that period. Pay in lieu of notice is taxed and subject to National Insurance in full. Employees under notice of redundancy have the right to reasonable time off to look for work or arrange training.

Consultation: individual and collective

You should always consult employees whose jobs are at risk, even if only one person is affected. GOV.UK warns that redundancies made without consultation are almost certain to be unfair. That means explaining why the role is at risk, how you'll select people, listening to their suggestions for avoiding redundancy, and considering any alternatives before you decide.

Collective consultation applies when you propose to make 20 or more employees redundant at one establishment within any 90-day period. You must:

1. notify the Redundancy Payments Service before consultation starts, using form HR1 online — at least 30 days before the first dismissal for 20 to 99 proposed redundancies, or 45 days for 100 or more;
2. consult trade union representatives, or elected employee representatives if there's no recognised union, with a view to reaching agreement, including on ways to avoid or reduce the redundancies;
3. give them written details of the reasons, the numbers and categories of staff affected, the selection method, how you'll carry out the dismissals and how redundancy payments will be calculated;
4. not dismiss anyone until the minimum period has passed — 30 days for 20 to 99 redundancies, 45 days for 100 or more.

Failing to notify the Redundancy Payments Service can bring an unlimited fine. Failing to consult properly can lead to a protective award of pay for each affected employee. Under the Employment Rights Act 2025, the maximum protective award doubled from 90 days' pay to 180 days' pay for dismissals on or after 6 April 2026. For a business making 25 people redundant, that's a potential bill of roughly six months' pay for each of them, on top of redundancy pay.

Collective redundancy at a glance (20+ at one site)

Step 1

Proposal: 20+ redundancies in 90 days

Step 2

Form HR1 to RPS

30 or 45 days before first dismissal

Step 3

Elect or brief representatives

Step 4

Consult with a view to agreement

Step 5

Minimum period ends

30 or 45 days

Step 6

Issue notices and pay

The organisation-wide trigger coming in 2027

At present, collective consultation is counted per establishment, so a business making 15 redundancies at each of three sites can avoid it. The Employment Rights Act 2025 adds a second, organisation-wide threshold: once the number of proposed redundancies across the whole employer reaches it, collective obligations apply wherever the jobs are. The government consulted until 21 May 2026 on setting the number, with a fixed figure between 250 and 1,000 as its preferred option, or a tiered approach based on headcount. The 20-at-one-site rule stays. The government's timeline lists this change for 2027 and it needs regulations approved by Parliament, so it won't affect most small businesses but is worth watching if you run several branches.

Fair selection and suitable alternative work

If you need to choose between employees, use objective, measurable criteria — skills, qualifications, standard of work, attendance (excluding protected absences such as pregnancy-related sickness) and disciplinary record are all common. "Last in, first out" on its own is likely to be age discrimination. Some reasons are automatically unfair: pregnancy and maternity, family leave, acting as an employee or union representative, union membership, being part-time or fixed-term, any protected characteristic, and asserting rights such as the minimum wage or holiday pay.

You must look for suitable alternative employment within the business and offer it before dismissal. A valid offer is unconditional and in writing, is made before the current contract ends, explains how the new job differs, doesn't require the person to apply, and starts within four weeks of the old job ending. The employee is entitled to a four-week trial period (longer if agreed in writing) and keeps their right to redundancy pay if the job turns out not to be suitable.

Employees who are pregnant, on maternity, adoption or shared parental leave, or who have returned from those types of leave within the protected window, must be offered any suitable vacancy ahead of other employees, even if a colleague is better qualified. For maternity returners, that priority lasts until 18 months after the birth — see the Statutory Maternity Pay guide.

Lay-offs and short-time working

If the contract allows it, you can lay off employees (no work and no pay) or put them on short-time working (less than half a week's pay) temporarily instead of making them redundant. While they're laid off, they're entitled to a statutory guarantee payment of up to £41 a day a day for up to five days in any three months.

If a lay-off or short-time working lasts four or more weeks in a row, or six or more weeks in a 13-week period with no more than three in a row, the employee can claim redundancy pay. They must write to you within four weeks of the last day of that period. You can resist the claim only if you can show that normal work is likely to resume within four weeks and last at least 13 weeks.

Tax on redundancy payments

Statutory redundancy pay is part of a termination payment. The first £30,000 of genuine redundancy and other termination payments is free of tax, and anything above it is taxed through payroll. What's tax-free depends on what the payment is for. Final wages, holiday pay, bonuses for work done and pay in lieu of notice are all earnings and taxed as normal, even if they're paid in the same lump sum. Show each element as a separate line on the final payslip and on the written statement you give the employee.

None of the examples above would be taxed, because they're all below £30,000. An employee receiving an enhanced package — say £22,530 statutory plus £15,000 enhanced redundancy — would be taxed on the £7,530 above the threshold.

Paying, recording and getting it wrong

Pay redundancy pay when the employee leaves or on their final payday, unless you agree a different date in writing. You must give a written statement showing the amount and how you calculated it. Keep it with the consultation records, the selection scoring and any alternative job offers.

If you don't pay, or the employee disputes the amount, they have six months from the end of employment to claim statutory redundancy pay at an employment tribunal, and the tribunal can still accept a late claim within a further six months. Since 1 October 2026, the time limit for most other employment tribunal claims, including unfair dismissal, has also risen from three to six months; in Scotland, the change for breach of contract claims takes effect on 9 November 2026. So a disputed redundancy can now surface half a year after the employee leaves.

If paying statutory redundancy would make the business insolvent, contact the Redundancy Payments Service before you dismiss; it may be able to help, and you repay it afterwards. If the company is already in insolvency, employees apply to the Redundancy Payments Service themselves. When you're closing a company, the guide to closing a limited company explains how staff liabilities fit into striking off or liquidation.

Redundancy checklist for small employers

0/9

• Business reason documented and alternatives considered (volunteers, reduced hours, vacancies)
• Collective threshold checked: 20+ at one establishment in 90 days → HR1 and 30/45-day consultation
• Selection criteria objective, scored and free of protected reasons
• Individual consultation meetings held and notes kept
• Suitable alternative vacancies offered — priority for pregnant staff and returners
• Service and age counted from the relevant date, including any statutory notice paid in lieu
• Week's pay capped at £751 and service at 20 years
• Notice, holiday and final pay calculated separately from redundancy pay
• Written statement of the calculation given to each employee

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Northern Ireland

Employment law is devolved in Northern Ireland, and the limits are set separately. nidirect currently gives a maximum week's pay of £783 and a maximum statutory redundancy payment of £23,490; the age bands and 20-year limit work the same way. The Employment Rights Act 2025 changes to collective redundancy and unfair dismissal don't apply there. If you employ people in Northern Ireland, use the nidirect calculator and guidance rather than GOV.UK's.

Common mistakes

Using the old cap. Redundancies on or after 6 April 2026 use £751, not £719. Spreadsheets built last year will underpay higher earners.

Counting partial years. Only complete years count, but remember to add statutory notice paid in lieu before you count — it can add a full year.

Using SMP or sick pay as "a week's pay". For employees on family leave or short-time working, use normal contractual pay.

Forgetting HR1. Many employers consult but forget to notify the Redundancy Payments Service, which is a separate offence.

Skipping consultation for one or two roles. There's no fixed process below 20, but no consultation at all usually means an unfair dismissal. From January 2027 that risk applies to anyone with six months' service.

Official links

• Making staff redundantProcess, consultation, notice, pay
• Calculate statutory redundancy payGOV.UK calculator
• Notify the Redundancy Payments Service (HR1)For 20+ proposed redundancies
• Collective redundancy: protective award changes180 days from 6 April 2026
• Acas: managing staff redundanciesStep-by-step process and templates
• nidirect: redundancy payNorthern Ireland limits

What to do next

Run each affected employee's figures through the GOV.UK redundancy calculator and keep a copy with your consultation notes. Then check their contracts for enhanced notice or redundancy terms — our guide to employment contracts explains what the written statement must already say about notice. Use the budget planner to cost redundancy pay, notice, holiday and any protective-award risk together before you announce anything.

This is general information, not legal or tax advice — confirm on the official source or with a professional.

Frequently asked questions

How much is statutory redundancy pay in 2026?

For each full year of service, an employee gets half a week's pay for years worked under age 22, one week's pay for years aged 22 to 40, and one and a half weeks' pay for years aged 41 and over. Service is capped at 20 years and a week's pay at £751 for redundancies on or after 6 April 2026, so the most anyone can get is £22,530.

Who is entitled to statutory redundancy pay?

Employees with at least two years' continuous service who are dismissed because of redundancy, or laid off or kept on short-time working long enough to claim. Workers who aren't employees, such as most casual staff, don't qualify. An employee who unreasonably refuses a suitable alternative job you offer can lose the right to the payment.

Is redundancy pay taxable?

Statutory redundancy pay, and any other genuine redundancy payment, is tax-free up to £30,000 in total. Anything above that is taxed. Payments for work already done, such as final wages, holiday pay and bonuses, are taxed as normal earnings, and so is pay in lieu of notice.

When do I need to consult collectively on redundancies?

When you propose making 20 or more employees redundant at one establishment within 90 days. You must notify the Redundancy Payments Service on form HR1 and consult for at least 30 days before the first dismissal, or 45 days if 100 or more are proposed. Failing to consult can cost up to 180 days' pay per employee for dismissals from 6 April 2026.

How is a week's pay worked out for redundancy?

For employees with normal hours, it's their normal gross weekly pay, including guaranteed overtime and contractual bonuses or commission. If pay varies with the hours worked, it's the average over the 12 weeks before the day they receive their redundancy notice. Either way, the figure is capped at £751 in England, Scotland and Wales.

What happens if my business can't afford redundancy pay?

If making the payments would make the business insolvent, contact the Insolvency Service's Redundancy Payments Service, which may be able to help with the statutory amounts. You'd have to repay the debt. If the business is already insolvent, employees can apply to the Redundancy Payments Service directly for statutory redundancy pay.

Sources & verification

Figures on this page were checked against the sources below when it was last reviewed on 9 October 2026. Each rate and limit is stored once with its own official source and review date, and official update channels are monitored daily so changes are picked up. How we verify

1. 1.Making staff redundant (printable guide) — GOV.UK · accessed 9 October 2026
2. 2.Redundancy: your rights — statutory redundancy pay — GOV.UK · accessed 9 October 2026
3. 3.Redundancy pay — your rights during redundancy — Acas · accessed 9 October 2026
4. 4.Collective redundancy: increased protective award — Department for Business and Trade (business.gov.uk) · accessed 9 October 2026
5. 5.Make Work Pay: threshold for triggering collective redundancy obligations — Department for Business and Trade · accessed 9 October 2026
6. 6.Plan to Make Work Pay and Employment Rights Act: timeline update — Department for Business and Trade · accessed 9 October 2026
7. 7.Unfair dismissal rights — Department for Business and Trade (business.gov.uk) · accessed 9 October 2026
8. 8.Employment tribunal time limits — Department for Business and Trade (business.gov.uk) · accessed 9 October 2026
9. 9.Employment Rights (Increase of limits) Order 2026 — Employment Cases Update · accessed 9 October 2026
10. 10.Redundancy pay (Northern Ireland) — nidirect · accessed 9 October 2026