The short answer
NHS redundancy pay is one month's pay for each complete year of reckonable service, up to a maximum of 24 months' pay. You need at least two years' continuous NHS service to qualify. This applies to staff on Agenda for Change contracts in England under Section 16 of the NHS Terms and Conditions of Service Handbook. Other nations have their own arrangements.
Who qualifies
- Employees on Agenda for Change terms who are dismissed because their post is redundant.
- At least two years' continuous NHS service with one or more NHS employers. A break of more than one statutory week generally breaks continuity.
- Bank staff depend on their individual contract, because the handbook does not automatically cover them.
Doctors, dentists and some senior managers are on different terms, so this scheme may not apply to you. If you do not qualify under it, you may still be due statutory redundancy pay.
How it is calculated
Only complete years of reckonable service count, and the total is capped at 24 months' pay. A month's pay is the more favourable of 4.35 × your weekly pay or one twelfth of your annual salary. It includes your basic pay plus regular elements such as high cost area supplements and regular unsocial-hours payments.
Earnings used in the calculation sit between a floor of £23,000 (pro-rated for part-time staff) and a ceiling of £80,000. Check the current figures with your HR team, as they are set nationally and can change.
Worked examples
Example 1. Priya has 10 complete years' service on £40,000 a year. A month's pay is £40,000 ÷ 12 = £3,333, so redundancy pay is 10 × £3,333 = £33,333. The statutory maximum for the same service would be well under £7,510 (10 weeks × the £751 cap at most).
Example 2. Tom has 28 years' service on £30,000. Years beyond the cap do not add anything, so he receives the 24-month maximum: 24 × £2,500 = £60,000.
Tax
Redundancy pay is normally tax-free up to £30,000, and the excess is taxed as income. In Priya's case, £30,000 would be tax-free and about £3,333 taxable. Payment in lieu of notice and holiday pay are usually taxable and sit outside the allowance. Our redundancy tax guide and the £30,000 rule explainer cover this in detail.
Alternative jobs and pensions
Your employer must look for suitable alternative employment before making you redundant. If you unreasonably refuse a suitable offer, you can lose your entitlement, so ask for the decision in writing first. If you are in the NHS Pension Scheme and close to pension age, you may be able to take your pension early. Rules and costs depend on your scheme and age, so ask NHS Pensions for a quote before you accept any package.
Rights during the process
You are entitled to consultation, notice and reasonable time off to look for work. Protections for people on maternity, adoption and neonatal leave are covered in our maternity leave redundancy guide. Your union representative can check your calculation before you sign anything.
What to do next
Ask HR for a written breakdown showing your reckonable service, the month's pay figure used and the months awarded. Compare it with the statutory minimum using the redundancy pay calculator. If the NHS figure is lower than the statutory one, raise it, as you cannot receive less than your legal entitlement.