Your redundancy pay calculation
Making sure you pay your redundant employees correctly is a vital part of the redundancy process.
Failure to pay the correct amount could result in a tribunal claim even after the employee has left the business. That’s where our redundancy calculator comes in…
If you like, you can jump straight into the calculation. Or, if you need a little further guidance, scroll down past the calculator for some guidance on how to use the tool.
Start your calculation
Based on age at the end of the employment period ( years) and length of service (years) the entitlement is
What you need to know
Individuals have a right to redundancy pay if they’re an employee and have worked for you for 2 years or more.
Statutory redundancy pay is calculated based on multiple factors. These include the employee's age, length of service, and weekly pay. If you’re looking for how to calculate redundancy, the quick formula is:
- One and a half week's pay for each complete year of service after reaching the age of 41
- One week´s pay for each complete year of service between the ages of 22 and 40 inclusive; and
- Half a week´s pay for each complete year of service under the age of 22.
Keep in mind that you need to take into account a maximum of 20 years when calculating a statutory redundancy payment. If employees have more than 20 years' service, the earlier years are ignored.
Alternatively, you can use our statutory redundancy calculator, which will do all of this for you.
Statutory notice pay
As part of the process, you must give a notice period before employment ends. Our statutory redundancy calculator will not give you a figure for notice pay, so it’s up to you to get this right.
How much redundancy pay they receive is dependent on the length of the notice period. You should pay employees their normal rate of pay during this time.
Any redundancy payments you make to staff under £30,000 are tax-free. However, if you owe redundant staff holiday pay or wages, tax and National Insurance (NI) deductions apply. The above tool is not a redundancy pay tax calculator. It’ll be up to you to apply any deductions you need to apply to your payments.
Pay in Lieu of Notice (PILON)
This term applies when you pay your employee instead of giving them a notice period. The above tool is a statutory redundancy pay calculator only and won’t give you a figure for PILON.
Luckily, PILON is simple to calculate. You should pay your employee all of the basic pay they would’ve received during the notice period. It’s possible that you may have to make extra payments such as pension contributions or private health care insurance. If you’re uncertain whether this applies to you, speak to one of our advisers today.
If eligible, you must pay employees at least the statutory minimum for redundancy pay. Plus, you must do this in line with a fair redundancy process, including adequate notice and consultation.
Getting redundancy wrong can result in a tribunal claim, which in turn results in costly pay-outs. Don’t take a chance with this incredibly important process, get support if you need it. Speak to one of our expert advisers today on 01455 858 132.