Quick Answer: Statutory Redundancy Pay Caps 2026
For redundancies occurring on or after 6 April 2026, the statutory redundancy pay weekly cap is £751 per week, and the maximum total statutory redundancy payment is £22,530 (capped at 20 years of service). Employees qualify if they have at least 2 years of continuous service. Payment is calculated based on age multipliers: 0.5 week’s pay per year served under age 22, 1 week’s pay per year served aged 22 to 40, and 1.5 weeks’ pay per year served aged 41 and over. Under UK tax law, the first £30,000 of redundancy pay is completely exempt from Income Tax and National Insurance.
Key Takeaways
- According to ONS labor market data, UK businesses process thousands of statutory redundancy settlements during annual corporate restructuring rounds.
- Statutory weekly pay is capped at £751 from April 2026, with a maximum statutory payment limit of £22,530.
- Employees aged 41 and over receive the highest multiplier of 1.5 weeks’ pay per year of service.
- The first £30,000 of qualifying redundancy pay is 100% tax-free, but PILON (Pay in Lieu of Notice) is fully taxable.
According to workplace relations research published by ACAS and official figures from the Department for Business and Trade, thousands of UK employers navigate organisational restructuring each year. For business directors, HR leaders, and managers, carrying out a redundancy process demands strict adherence to statutory entitlement rules and employment laws.
Redundancy occurs when a business needs to reduce its workforce because a workplace is closing, a specific role is no longer required, or trading requirements have changed. However, dismissing employees without following statutory consultation steps or miscalculating redundancy pay exposes employers to costly Unfair Dismissal claims at an Employment Tribunal.
To assist UK business owners and employers, this guide details the exact statutory redundancy pay caps for 2026, age multiplier calculations, the £30,000 tax exemption rule, ACAS consultation procedures, and mandatory notice periods.
1. What Is Statutory Redundancy Pay?
Statutory Redundancy Pay (SRP) is the legal minimum compensation an employer must pay to an eligible employee whose job becomes redundant. It provides financial support while the individual transitions into new employment.
To qualify for statutory redundancy pay under UK employment law, an individual must:
- Be classed legally as an employee working under an employment contract.
- Have accumulated a minimum of 2 years of continuous service with the employer.
- Have been made redundant due to a genuine business operational reason.
For employers managing wider business expense forecasting alongside staff restructuring, review our financial calculators in the Business Tools Hub.
2. Statutory Redundancy Pay Rates & Multipliers (2026)
Statutory redundancy pay is calculated using three variables: the employee’s age during each year of service, their length of continuous service (capped at 20 years), and their gross weekly pay (subject to the statutory cap).
The 2026 Statutory Rate Caps:
- Maximum Weekly Pay Cap: £751 per week (for redundancies on or after 6 April 2026).
- Maximum Total Statutory Pay: £22,530 (20 years × 1.5 weeks × £751).
Age Multiplier Breakdown Table
| Employee Age Bracket | Statutory Redundancy Multiplier | Max Entitlement Per Year (2026 Cap) |
|---|---|---|
| Under Age 22 | 0.5 week’s pay for each full year | £375.50 per year served |
| Age 22 to 40 | 1.0 week’s pay for each full year | £751.00 per year served |
| Age 41 and Over | 1.5 weeks’ pay for each full year | £1,126.50 per year served |
Worked Example Calculation:
An employee aged 45 who has worked continuously for 10 years earning £800 gross per week:
- Weekly pay is capped at £751 (since £800 exceeds the statutory limit).
- 4 years served aged 41-45: 4 years × 1.5 multiplier = 6 weeks’ pay.
- 6 years served aged 35-40: 6 years × 1.0 multiplier = 6 weeks’ pay.
- Total entitlement: 12 weeks × £751 cap = £9,012 statutory redundancy pay.
Official entitlement guidelines can be verified on the GOV.UK redundancy rights guidance portal.
3. The £30,000 Tax Exemption Rule & HMRC Rules
Under UK tax law, statutory redundancy payments benefit from special tax treatment under HMRC rules:
│
Portion Above £30k Subject to Income Tax & Employer NI
Taxable vs Non-Taxable Redundancy Elements:
- Tax-Free (Up to £30,000): Statutory redundancy pay and enhanced contractual redundancy severance payments.
- Fully Taxable from £1: Pay in Lieu of Notice (PILON), accrued unpaid holiday pay, outstanding bonuses, and regular salary up to the termination date.
When evaluating broader leadership responsibilities during business restructuring, read our guide on how to become a better leader at work.
Mandatory Notice Periods & Pay
In addition to redundancy pay, employers must provide statutory notice or pay in lieu of notice (PILON):
- 1 Month to 2 Years Service: At least 1 week’s notice.
- 2 Years to 12 Years Service: 1 week’s notice for each full year of service.
- 12 Years or More Service: 12 weeks’ statutory notice.
During the statutory notice period, employees are entitled to their normal pay and benefits. Employers must also allow reasonable time off with pay for employees to look for new work or arrange training.
ACAS Redundancy Consultation Process
Employers must follow a fair and transparent consultation process before making final redundancy decisions.
Individual vs Collective Consultation Rules:
- Under 20 Redundancies: Individual consultation with affected staff. No fixed statutory timeframe, but must allow reasonable time for discussion.
- 20 to 99 Redundancies: Collective consultation must start at least 30 days before the first dismissal, and HMRC Form HR1 must be submitted.
- 100+ Redundancies: Collective consultation must start at least 45 days before the first dismissal.
When macroeconomic pressures affect commercial margins, view our analysis of uk inflation impact on small business.
Frequently Asked Questions
Can a director claim statutory redundancy pay?
Yes. A company director who is also a bona fide employee under an employment contract and has worked for at least 2 years of continuous service can claim statutory redundancy pay if the limited company enters formal liquidation or administration.
What happens if an employer cannot afford to pay redundancy?
If an employer is formally insolvent, employees can claim their statutory redundancy pay, holiday pay, and statutory notice pay from the government’s Insolvency Service Redundancy Payments Office (RPO).
Is enhanced redundancy pay tax-free?
Enhanced (contractual) redundancy pay is tax-free up to the combined £30,000 threshold alongside statutory redundancy pay. Any balance exceeding £30,000 is subject to Income Tax and National Insurance.
Does an employee get redundancy pay if offered an alternative job?
If an employer offers suitable alternative employment within the business and the employee unreasonably refuses it, the employee may forfeit their right to statutory redundancy pay.
Your Next Actions
- Audit Length of Service & Ages: Create a summary schedule listing start dates, ages, and gross weekly earnings for affected staff.
- Calculate Weekly Pay Caps: Apply the £751 weekly cap and relevant age multipliers to determine total statutory exposure.
- Initiate Formal ACAS Consultation: Issue written consultation letters to employees outlining the commercial reasons for proposed redundancies.
- Review Insurance & Overhead Budgets: Assess company liabilities and business insurance requirements before completing final redundancy agreements.
Editorial Team & Signature
Written by Oliver Carpenter, Lead HR & Business Analyst at Elite Business Journal. Published February 2026.
