Statutory Redundancy Pay 2026/27: How to Calculate It

Updated 2026/27 · 5 min read · EmployerCalculator Editorial

The statutory redundancy pay formula

Statutory redundancy pay in 2026/27 is calculated using three variables: the employee's age at the time of redundancy, their completed years of continuous employment (up to a maximum of 20 years), and their weekly pay, which is capped at £700 per week. The weekly pay cap means that an employee earning £50,000 per year (approximately £962 per week) has their redundancy calculated as though they earn £700 per week — the excess above the cap is ignored for statutory redundancy purposes.

The multiplier by age is: half a week's pay for each complete year of service worked while under 22; one week's pay for each year worked between ages 22 and 40; and one and a half week's pay for each year worked while aged 41 or over. The maximum statutory redundancy payment is therefore 20 years multiplied by 1.5 (for those over 41 throughout) multiplied by £700, giving a maximum of £21,000.

A practical worked example: an employee aged 38 with 10 years of continuous service earning £35,000 (weekly pay £673, capped at £673 as it is below the £700 cap). All 10 years fall in the 22–40 multiplier band, so the calculation is 10 × 1 × £673 = £6,730. If that same employee were aged 42 with 10 years of service, all years would use the 1.5 multiplier: 10 × 1.5 × £673 = £10,095.

Tax treatment and enhanced redundancy

The first £30,000 of any redundancy payment — statutory or contractual enhanced — is free from income tax. This threshold applies to the combined total of all redundancy-related payments received in connection with the same termination, including enhanced redundancy, ex-gratia payments and payments in connection with loss of office. Statutory redundancy pay almost never approaches this threshold, but for long-serving senior employees with generous enhanced terms, the £30,000 limit can become relevant.

Amounts above the £30,000 threshold are subject to income tax but not employee or employer NI. This is a significant distinction: unlike regular salary, neither the employee nor the employer pays NI on the taxable element of a redundancy payment above the threshold. The employer should withhold income tax on the excess through payroll, but no NI withholding or employer NI payment is required.

Enhanced redundancy pay — where the employer pays more than the statutory minimum — is common in unionised environments, the public sector, and among employers who use enhanced terms as a retention tool. Contractual enhanced redundancy schemes should be clearly documented in employment contracts or a separate policy to ensure they are enforceable and consistently applied. Inconsistent application of enhanced terms can give rise to discrimination or breach of contract claims.

Legal obligations and process

Employers must pay statutory redundancy pay to employees with at least two years of continuous employment who are dismissed by reason of redundancy. Payment must be made on or before the final day of employment, or on the employee's normal pay day if that is earlier. Failure to pay can result in an employment tribunal claim and the employee may also complain to HMRC.

Selection for redundancy must be based on objective, fair criteria. Using criteria that could be directly or indirectly discriminatory — such as selecting solely on part-time status, which disproportionately affects women — creates significant legal risk. Absent a genuine, consistently applied selection matrix, employment tribunals frequently find for the employee even where the commercial rationale for redundancy is sound.

For collective redundancies — where 20 or more employees are made redundant within a 90-day period — statutory collective consultation obligations apply. A minimum 45-day consultation period is required for 100 or more redundancies in 90 days. Failure to comply with collective consultation requirements results in a protective award of up to 90 days' pay per employee, in addition to any unfair dismissal liability.

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Frequently asked questions

How much does it cost to employ someone in the UK?

The true cost to employ someone in the UK is typically 15–20% above gross salary. At £30,000: employer NI £3,750 + pension £713 = approximately £34,463 per year. At £50,000: employer NI £6,750 + pension £1,313 = approximately £58,063 per year. Adding workplace overheads of £2,000–£5,000 can bring the total to 20–25% above the headline salary.

What is the employer NI rate for 2026/27?

For 2026/27, employer Class 1 National Insurance is charged at 15% on employee earnings above the secondary threshold of £5,000 per year (£96 per week, £416 per month). This rate increased from 13.8% in April 2025, when the threshold was simultaneously cut from £9,100 to £5,000. Both changes apply from 6 April 2025.

How much employer NI do I pay on a £35,000 salary?

At £35,000 salary, employer NI for 2026/27 is £4,500 per year — 15% on £30,000 of earnings above the £5,000 threshold. That is £375 per month. In 2024/25, the same salary produced £3,585 in employer NI. The April 2025 changes therefore add £915 per year on this salary alone.

What is Employment Allowance and who can claim it?

Employment Allowance lets eligible employers reduce their annual employer NI bill by up to £10,500 in 2026/27, increased from £5,000 in 2024/25. The previous £100,000 NI bill eligibility cap has been removed, so more businesses qualify. Companies where the only paid employee is also a director cannot claim. Apply through payroll software via the Employer Payment Summary indicator.

What is the total employer cost above salary?

Beyond salary, employer cost includes: employer NI (15% on earnings above £5,000), employer pension (minimum 3% of qualifying earnings between £6,240 and £50,270), and overheads such as equipment, software and workspace. For most UK salaries this adds 12–20% above headline pay. Use the inputs above to set your exact pension rate and overhead figure.

What changed for employers in April 2025?

Three changes took effect from 6 April 2025: the employer NI rate rose from 13.8% to 15%, the secondary threshold was cut from £9,100 to £5,000, and Employment Allowance increased from £5,000 to £10,500 with the eligibility cap removed. For a £30,000 salary, annual employer NI increased from approximately £2,884 to £3,750 — a rise of £866 per year.

How is employer NI different from employee NI?

Employer NI is a cost paid by the employer on top of gross salary — it does not reduce take-home pay. Employee NI is deducted from the employee's wages instead. For 2026/27, employees pay 8% on earnings between £12,570 and £50,270, then 2% above that. Employers pay 15% on all earnings above £5,000 with no upper cap. This calculator covers the employer side; for employee take-home pay see AfterTaxSalary.co.uk.

What are employer costs in the UK?

UK employer costs in 2026/27 are: gross salary, employer NI at 15% on earnings above £5,000, employer pension at minimum 3% of qualifying earnings (£6,240–£50,270), and any operational overheads such as equipment or software. For a £35,000 salary, statutory employer costs (NI + pension) add approximately £5,363/year before overheads.

How much do I cost my employer in the UK?

If you earn £35,000, you cost your employer roughly £40,363/year — your salary plus £4,500 employer NI and £863 minimum pension. At £50,000, the total is approximately £58,063. Your employer pays these on top of your salary; they are not deducted from your pay. Use this calculator to see the exact figure for your salary.

Is this a PAYE cost calculator for employers?

Yes. PAYE employer costs include employer NI — calculated at 15% above £5,000 for 2026/27 — plus the employer's auto-enrolment pension contribution. The full calculator models both alongside any overhead assumptions to give a total PAYE-basis employer spend per employee.

What is a cost to company (CTC) salary in the UK?

Cost to company (CTC) in the UK refers to the total annual cost of an employee to their employer — salary, employer NI, pension, and overheads combined. A £35,000 CTC salary typically means a gross salary of roughly £30,000–£32,000 once the employer's NI and pension obligations are included in the total. Use this calculator to work backwards from a CTC budget to a gross salary.