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Employment Tax

Statutory redundancy pay

Produced by Tolley in association with Sue El Hachmi of Osborne Clarke LLP
  • 25 Feb 2022 15:56

The following Employment Tax guidance note Produced by Tolley in association with Sue El Hachmi of Osborne Clarke LLP provides comprehensive and up to date tax information covering:

  • Statutory redundancy pay
  • Employment law obligations
  • What if the employer is insolvent?
  • Limited exemption for statutory redundancy payments
  • Reporting

Statutory redundancy pay

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.

For more on non-statutory redundancy pay, see the Non-statutory redundancy pay guidance note.

HMRC guidance is at EIM13760 onwards. See also Simon’s Taxes E4.824 and E4.802F.

Employment law obligations

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

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. From 6 April 2021, the maximum amount of a week’s pay is

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