Statutory redundancy pay

By Tolley

The following Personal Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Statutory redundancy pay
  • Employment law obligations
  • Limited exemption for statutory redundancy payments
  • Reporting

Redundancy payments fall into two categories: statutory payments and non-statutory payments.

Statutory redundancy is the amount which must be paid by the employer to the employee under employment law and will be a fixed amount for each year of service. Statutory redundancy pay is usually exempt from tax (see below).

Non-statutory redundancy payments are any other payment made by the employer to the employee on redundancy. The tax treatment of these payments is discussed in the How could a termination payment be taxed? guidance note.

Employment law obligations

An employee is entitled to a statutory redundancy payment if he is made redundant after being continuously employed by the employer for at least two years.

Employment Rights Act 1996, ss 135, 139, 155 (subscription sensitive)

The statutory redundancy payment is calculated by reference to the employee’s age, length of service and gross weekly pay. The amount of a week’s pay is subject to a statutory maximum cap which is reviewed each year. Since 6 April 2018, the maximum amount of a week’s pay is £508 (£489 between 6 April 2017 and 5 April 2018). You can calculate the amount the employee must receive using the GOV.UK redundancy pay calculator .

Employment Rights Act 1996, s 162 (subscri

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