UK Severance Pay Calculator

In the UK, redundancy pay is not simply a flat amount based on salary. It is calculated using three factors: your age, your complete years of continuous service, and your weekly pay subject to the statutory cap. Because the formula is age-weighted, older workers and longer-serving employees often build a larger statutory entitlement.

To be eligible for statutory redundancy pay, you normally need to be an employee with at least two complete years of continuous service and to have been genuinely made redundant. Dismissal for misconduct or refusal of suitable alternative employment can change the outcome.

The statutory formula counts each full year of service separately: 0.5 week for years under age 22, 1 week for years aged 22 to 40, and 1.5 weeks for years aged 41 or over. Service is capped at 20 years.

The Weekly Pay Cap

The weekly pay used in the statutory calculation is capped. This calculator uses the current post-6 April 2026 cap of £751 per week. If your actual weekly pay is higher, the statutory formula still uses the cap.

How Many Weeks Redundancy Pay?

The number of weeks depends on the age band that applied during each year of service:

Only the most recent 20 years count toward the statutory calculation, so very long tenures stop increasing the minimum entitlement after that point.

Enhanced Redundancy Pay

Many employers offer enhanced redundancy pay above the statutory minimum. That enhancement may add extra weeks, ignore the statutory cap, or do both. Always compare the statutory minimum with your contract, handbook, and any redundancy policy or settlement proposal.

The £30,000 Tax-Free Threshold

The first £30,000 of a genuine redundancy payment can usually be exempt from income tax. That typically includes statutory redundancy pay and some qualifying enhanced redundancy amounts.

If the redundancy element exceeds £30,000, the excess is generally taxed as income. This is why a proper breakdown matters more than the gross headline figure when you compare two offers.

Notice Pay and PILON

Notice pay, including payment in lieu of notice, is treated as taxable earnings. It does not share the £30,000 redundancy exemption.

Holiday Pay

Accrued but unused holiday paid out on termination is normally taxable as earnings because it represents pay for an employment entitlement rather than a genuine redundancy payment.

Ex-Gratia Payments

Ex-gratia payments can sometimes fall within redundancy treatment if they are genuinely part of the termination package rather than pay for work, benefits, or some separate obligation.

For larger packages, it is worth checking how each payment is described in the paperwork because tax classification often drives more value than the gross total.

Statutory Minimum Notice

UK employees are generally entitled to minimum notice based on service, with the contractual period applying instead if it is longer. The calculator shows the higher of the statutory minimum and the contractual notice you enter.

Garden Leave

Garden leave means you remain employed and paid during notice but do not continue your normal duties. From a tax perspective it is usually ordinary taxable pay rather than tax-free redundancy compensation.

PILON

Payment in lieu of notice lets employment end immediately while a lump sum is paid for notice instead. In practice it is usually taxed as earnings.