The three age bands
How is redundancy pay calculated? Go through each complete year of service, counting back from your last day, and award weeks of pay according to your age in that year:
| Your age in that year | Weeks' pay earned |
|---|---|
| Under 18 | 0 |
| 18 to 21 | 0.5 |
| 22 to 40 | 1 |
| 41 and over | 1.5 |
Add up the weeks, then multiply by your weekly pay, capped at £751 in 2026/27. Up to 20 years count, and you need at least 2 years' service to qualify.
Example 1: steady mid-career
Dan is 30 with 8 years' service on £500 a week. Every year falls in the 22 to 40 band: 8 × 1 = 8 weeks. 8 × £500 = £4,000, which is tax-free.
Example 2: crossing the 41 line
Aisha is 45 with 15 years' service on £700 a week. Counting back, 5 years fall at 41 or over (5 × 1.5 = 7.5 weeks) and 10 years at 22 to 40 (10 × 1 = 10 weeks). That is 17.5 weeks × £700 = £12,250.
Example 3: started young
Tom is 24 and joined at 16, so he has 8 years' service on £400 a week. One year was spent under 18 and earns nothing. Four years were aged 18 to 21 (4 × 0.5 = 2 weeks) and three were aged 22 to 24 (3 × 1 = 3 weeks). That is 5 weeks × £400 = £2,000.
Example 4: the cap bites
Helen is 35 with 10 years' service on £900 a week. Her pay is capped at £751 for the calculation: 10 weeks × £751 = £7,510. Her employer may pay more under an enhanced scheme.
Common mistakes
- Using annual salary. The formula uses gross weekly pay, so divide annual salary by 52.
- Forgetting the cap. A weekly figure over £751 is reduced to £751.
- Counting part years. Only complete years count.
- Assuming the statutory figure is the final offer. It is the legal minimum, and many employers pay more.
What to do next
Skip the arithmetic and use the redundancy pay calculator, which shows each year's band. To understand eligibility and tax, read statutory redundancy pay explained.