UK Statutory Redundancy Pay 2024/25: Rates, Eligibility And Rules

Redundancy is one of those business decisions no small business owner wants to make - but sometimes it’s unavoidable.

If you’re reducing headcount because the business is restructuring, a site is closing, or you simply don’t need certain roles anymore, you’ll usually be dealing with statutory redundancy pay 2024/25 (and the wider legal process that comes with it).

The tricky part isn’t just the money. Redundancy also involves consultation, fair selection, suitable alternative roles, correct notice, and getting your paperwork right. If you get any of that wrong, redundancy can quickly turn into an unfair dismissal risk.

This guide breaks down the statutory redundancy pay rules for 2024/25, how the calculation works in practice for employers, and the key obligations you’ll want to build into your redundancy plan.

What Counts As A Genuine Redundancy (And When Statutory Redundancy Pay Applies)

Before you even get to pay calculations, it’s worth checking you’re dealing with a “redundancy situation” in the legal sense.

In broad terms, a redundancy can arise where:

• Your business closes (or is intending to close);
• A workplace closes (for example, you’re shutting a branch or relocating and the role won’t continue at the employee’s location); or
• Your need for employees to do work of a particular kind has reduced (for example, reduced demand, restructure, automation, outsourcing, or merging roles).

Statutory redundancy pay is typically relevant where you are:

• dismissing an employee by reason of redundancy; and
• the employee meets the eligibility requirements (we cover these below).

Be careful: not every termination is a redundancy. If the underlying issue is performance, conduct, capability, or “we’ve fallen out”, calling it redundancy won’t make it one - and the legal risks can be higher if the true reason doesn’t match the process you’ve used.

If you’re planning redundancies, it’s usually a good time to sanity-check your employment documents too, such as your Employment Contract and any policies in your Staff Handbook, so your process matches what you’ve promised in writing.

Statutory Redundancy Pay 2024/25 Rates (The Numbers Employers Need)

The amount of statutory redundancy pay in 2024/25 is based on a formula set by law. It uses:

• the employee’s age during each year of service,
• their length of continuous service (capped), and
• their weekly pay (capped).

Weekly Pay Cap For Statutory Redundancy Pay 2024/25

For redundancies where the “relevant date” (usually the termination date) falls on or after 6 April 2024, the statutory weekly pay cap is:

• £700 per week

This weekly cap is critical because even if the employee earns more than £700 per week, you only use £700 in the statutory calculation (unless your contract provides enhanced redundancy pay).

Maximum Statutory Redundancy Pay 2024/25

The maximum number of years you can count is 20 years. The maximum “weeks” multiplier is 1.5 weeks per year (for years worked aged 41+).

So the maximum statutory redundancy pay for 2024/25 is typically:

• 20 years × 1.5 × £700 = £21,000

Many employees receive less than this - but from a cashflow perspective, it’s helpful for small business owners to know the ceiling.

Important: statutory redundancy pay is different from (and in addition to) pay for notice, holiday pay, outstanding wages, commission arrangements, bonuses, and any contractual redundancy enhancements you’ve agreed to.

Who Is Eligible For Statutory Redundancy Pay?

Not every worker you engage will qualify for statutory redundancy pay.

In most cases, an individual will be eligible for statutory redundancy pay if:

• they are an employee (not genuinely self-employed);
• they have at least 2 years’ continuous employment with you at the “relevant date”;
• they are being dismissed by reason of redundancy; and
• they have not fallen into a category that excludes entitlement (for example, certain share fishermen, members of the armed forces, etc.).

In some cases, employees may also become entitled to statutory redundancy pay if they resign in response to being laid off or placed on short-time working for a qualifying period and follow the required statutory notice process. These rules are technical and time-sensitive, so it’s worth getting advice if you’re using lay-off/short-time as part of cost-saving measures.

What About Fixed-Term Staff?

Fixed-term employees can still qualify if they have 2+ years’ continuous service and the role genuinely ends for redundancy reasons.

However, watch out for how you handle the non-renewal. If a fixed-term contract expires and you simply choose not to renew, that can still be a dismissal - and may still be redundancy if the role is no longer needed.

What About Casuals, Zero-Hours, Or Contractors?

Eligibility turns on employment status and continuous service, not the label you’ve used. Someone engaged “casually” or on “zero hours” can still be an employee depending on the reality of the relationship.

If you’re unsure who is an employee (and who isn’t), it’s worth getting advice early - redundancy mistakes often start with misclassifying the workforce.

What If An Employee Refuses Suitable Alternative Employment?

In many redundancy situations you should consider (and consult on) suitable alternative roles. If you offer suitable alternative employment and the employee unreasonably refuses it, they may lose entitlement to redundancy pay.

That said, whether an alternative is “suitable” and whether refusal is “reasonable” depends heavily on the facts (pay, status, location, working hours, skills match, personal circumstances). This is a common dispute area, so it’s wise to document your reasoning and consultation discussions carefully.

Related reading that often comes up in restructuring: if you’re buying/selling parts of a business, redundancy can overlap with employee transfer rules. In that scenario, TUPE considerations may also be relevant.

How To Calculate Statutory Redundancy Pay 2024/25 (With Worked Examples)

The statutory redundancy formula is based on the employee’s age in each year of service:

• 0.5 week’s pay for each full year of service where the employee was under 22
• 1 week’s pay for each full year of service where the employee was 22 to 40
• 1.5 week’s pay for each full year of service where the employee was 41 or older

Then apply the weekly pay cap (for statutory purposes) of £700 for 2024/25.

You also only count up to 20 years of service.

Step-By-Step: Employer Calculation Checklist

1. Confirm the employee has at least 2 years’ continuous service.
2. Work out the number of complete years of service to count (maximum 20).
3. For each year of service, identify the employee’s age during that year to apply the correct multiplier (0.5 / 1 / 1.5).
4. Calculate the employee’s week’s pay under the statutory rules (which can differ for fixed hours vs variable pay), then apply the cap (£700).
5. Multiply “weeks” by the capped weekly pay figure.

Where pay varies (for example, irregular hours, variable commission, or fluctuating overtime), the statutory “week’s pay” calculation can involve averaging over a reference period and may exclude some elements depending on how pay is structured. Because this can materially change the redundancy figure, it’s a good idea to double-check the statutory method before confirming amounts.

Worked Example 1: Employee Aged 35, 6 Years’ Service, £500/Week

• Age band for all years: 22–40 → 1 week per year
• Years: 6
• Weekly pay: £500 (below cap)

Statutory redundancy pay: 6 × 1 × £500 = £3,000

Worked Example 2: Employee Aged 45, 10 Years’ Service, £950/Week

• Age band: 41+ → 1.5 weeks per year (assuming all 10 years are within this band; in real life you may need to split years by age band)
• Years: 10
• Weekly pay: £950, but statutory cap applies → £700

Statutory redundancy pay: 10 × 1.5 × £700 = £10,500

Worked Example 3: Mixed Age Bands (Common In Practice)

Let’s say an employee has 12 years’ service and turned 41 partway through that service. You’ll usually calculate:

• the years when they were aged 22–40 at 1 week each; and
• the years when they were aged 41+ at 1.5 weeks each.

This “split” is one reason redundancy calculations can become fiddly, especially if you also have irregular pay or variable hours.

If your redundancy programme is larger (or you’re dealing with varied contracts), it’s often safer to get the calculation checked before you confirm figures to employees.

Employer Obligations Beyond The Payment (Consultation, Selection, Notice And Paperwork)

For small businesses, redundancy risk often isn’t the statutory redundancy pay figure - it’s the process around it.

Even if you pay the right amount, an employee can still bring claims if the dismissal process was unfair or discriminatory.

1) Consultation: Individual And (Sometimes) Collective

You’ll typically need to consult with impacted employees. Consultation should be meaningful - not a tick-box exercise.

This usually includes:

• explaining the business rationale and what changes are proposed;
• confirming which roles are “at risk” and why;
• discussing ways to avoid redundancies (if possible);
• considering reduced hours, redeployment, role changes, or other cost-saving steps;
• inviting feedback, and genuinely considering alternatives.

If you’re proposing to make 20 or more redundancies at one establishment within 90 days, collective consultation obligations can apply, with minimum timeframes. The details matter, and the penalties for getting this wrong can be serious, so it’s worth checking redundancy consultation periods early in your planning.

2) Fair Selection And A Clear Scoring Method

If you have a genuine reduction in roles, you’ll usually need to identify a “selection pool” and apply fair selection criteria.

A common approach is to use a scoring matrix based on objective factors such as:

• skills and qualifications;
• performance (using documented evidence);
• disciplinary record (carefully and consistently applied);
• attendance (but take extra care with disability-related absences and maternity-related absences).

To make this defensible, it helps to use a structured method like a redundancy scoring matrix, and to keep notes showing how you reached the outcome.

Tip: if the criteria are vague (for example, “attitude” with no clear definition), your scoring can be attacked as subjective or biased.

3) Notice Of Termination And Notice Pay

Redundancy dismissals still require notice. Notice can be:

• contractual notice (from the employment contract); or
• statutory minimum notice (whichever is longer, in most cases).

Statutory minimum notice is generally:

• 1 week if employed between 1 month and 2 years
• 1 week per year of service between 2 and 12 years
• 12 weeks for 12+ years

You’ll also need to decide whether the employee will:

• work their notice,
• be placed on garden leave (if your contract allows), or
• receive pay in lieu of notice (PILON) (again, ideally supported by contract wording).

Notice can raise separate pay and tax treatment issues, so it’s important to distinguish notice pay from redundancy pay. If you want a deeper breakdown of employer duties here, statutory notice pay is worth keeping on your radar when you’re costing redundancies.

4) Final Payments: Holiday, Commission, Bonuses And Deductions

At termination you’ll usually need to pay:

• statutory redundancy pay (if eligible);
• notice pay (unless worked);
• any accrued but untaken holiday pay; and
• any outstanding wages and contractual entitlements (for example, commission that has already been earned).

If you want to make a “clean break” and settle potential claims, you may also consider an ex gratia payment and a settlement agreement - but that’s a separate (and more formal) process.

5) Keep Your Documentation Tight (This Is What Protects You Later)

In a small business, redundancy decisions are often made quickly - but you still want a paper trail.

In practice, that means keeping:

• the business rationale (e.g. budget forecasts, restructure plan);
• at-risk letters and consultation invites;
• consultation notes and employee feedback;
• selection pool reasoning and scoring sheets;
• any suitable alternative employment offers (and responses);
• dismissal letters, final pay calculations, and payment records.

This is also where having consistent workplace documentation helps - for example, policies in your staff handbook and termination clauses in your employment contracts can reduce uncertainty during a restructure.

6) Watch For Discrimination Risks

Redundancy can unintentionally create discrimination risk if selection criteria (or the selection pool) disadvantages employees with protected characteristics (age, disability, pregnancy/maternity, race, sex, religion, etc.).

Some common danger areas include:

• scoring down people for disability-related absences;
• including maternity leave as a negative factor;
• using “last in, first out” approaches that indirectly discriminate by age;
• assuming part-time staff are less “valuable” or “committed”.

This is one of the reasons redundancy is often worth getting reviewed before you implement it - especially if emotions are high or the business is under pressure.

Practical Tips For Small Businesses Managing Redundancy Pay And Cashflow

Redundancy can be a financial hit - particularly for small businesses with limited reserves. A few practical steps can help you stay in control.

Forecast Your Worst-Case Cost Early

As soon as redundancies become likely, cost out:

• statutory redundancy pay (using the 2024/25 cap of £700/week);
• notice pay (and associated employer costs, where applicable);
• holiday pay; and
• any contractual enhancements.

This avoids getting to the end of the process and realising you can’t afford to pay what’s due.

Don’t Assume A “Resignation” Solves It

Sometimes an employee will offer to resign to “make it easier”. Be cautious here. If the resignation is prompted by redundancy discussions, you could still end up in a dispute about whether it was really a dismissal (or whether there was pressure involved).

If an employee wants to leave on agreed terms, document it properly and ensure they have the opportunity to take independent advice where appropriate.

Consider Whether You’re Actually Changing Roles, Not Removing Them

If you remove a role but introduce a very similar role with a new title, you can undermine the redundancy rationale.

That doesn’t mean businesses can’t restructure - you can - but you’ll want to be clear about what has genuinely reduced (work type, volume, structure) and how new roles differ.

Get Advice Early If You’re Unsure

Redundancy is one of those areas where a quick legal check can prevent expensive mistakes later. If you need hands-on support with the process, timelines, documentation, or selection criteria, Redundancy Advice can save you a lot of back-and-forth (and reduce claim risk).

Key Takeaways

• Statutory redundancy pay for 2024/25 uses a legal formula based on age, length of service (up to 20 years), and weekly pay capped at £700 for relevant dates on or after 6 April 2024.
• Employees usually need at least 2 years’ continuous employment to qualify for statutory redundancy pay (subject to limited exceptions, including some lay-off/short-time situations).
• Even if you pay the correct redundancy amount, you still need a fair redundancy process (consultation, fair selection, and consideration of alternatives) to reduce unfair dismissal and discrimination risk.
• Redundancy pay is only one part of termination costs - you’ll often also need to pay notice pay, holiday pay, and any outstanding contractual entitlements.
• Using structured selection methods (and keeping written records) makes it much easier to defend your decisions if challenged later.
• Strong documentation from day one - including a clear Employment Contract and a consistent Staff Handbook - helps redundancies run more smoothly when business conditions change.

Note: this article is general information, not legal or tax advice. Tax treatment can depend on the type of termination payment and your specific circumstances - consider taking professional advice before finalising figures.

If you’d like help managing redundancies properly (including calculating statutory redundancy pay, running consultation, and preparing the right letters), you can reach us at 08081347754 or team@sprintlaw.co.uk for a free, no-obligations chat.