Statutory redundancy pay is a floor, not a ceiling. Many employers pay more, and for anyone earning a decent salary the difference is substantial — because the statutory calculation caps weekly pay at £751 regardless of what you actually earn.
Someone aged 46 on £1,200 a week with 10 years’ service gets £9,387.50 statutorily — the formula gives 12.5 weeks’ pay, but at the capped rate of £751 rather than their actual £1,200. An enhanced scheme using actual weekly pay would give £15,000 for exactly the same service.
That is a £5,612.50 difference produced entirely by the cap, with no change to the formula at all.
Age is counted for each year of service, reckoning backwards from the date employment ends — not your age today.
Where enhanced pay comes from
Your contract. A written redundancy scheme in your contract or staff handbook is legally binding.
A collective agreement. Where a union has negotiated terms, those usually apply to everyone in the bargaining unit.
Custom and practice. If an employer has consistently paid enhanced redundancy over a long period, it can become an implied contractual term. This needs the practice to be well known, consistent and long-standing — one generous payment does not create a right.
Discretion. Many employers offer more than the minimum simply to secure agreement and a clean exit, particularly where a settlement agreement is involved. This is not an entitlement and can be withdrawn.
How enhanced schemes usually work
Three common structures:
Uncapped weekly pay. The statutory formula, but using your actual weekly pay instead of the £751 cap. Simple, and often the most valuable change for higher earners.
A multiplier. The statutory calculation multiplied by 1.5 or 2.
Weeks per year of service. For example three or four weeks’ pay per year, often with the 20-year service cap removed.
Some schemes remove the age bands entirely, paying a flat rate per year regardless of age. Whether that helps depends on your age — it is better for younger workers and worse for those over 41.
Tax treatment is different
This matters, and it is where enhanced pay is genuinely more complicated than statutory pay.
Statutory redundancy pay is not a “relevant termination award” and automatically falls outside tax. Enhanced redundancy pay is a relevant termination award, so it is eligible for the £30,000 exemption but not automatically outside tax.
The practical consequence: if part of your package is really notice pay, HMRC’s post-employment notice pay rules can pull a slice of the enhanced payment into full taxation as earnings before the exemption is applied to what remains.
See our guides to redundancy pay and tax and pay in lieu of notice.
What to check before signing
Is the scheme contractual or discretionary? This determines whether you can insist on it. Look at your contract, the staff handbook, and the intranet.
How is “pay” defined? Basic salary only, or including bonus and allowances? On a commission-heavy role this can be the largest single variable.
Is service capped? Statutory caps at 20 years. Many enhanced schemes do not.
Are you being asked to waive anything? Enhanced pay above the contractual minimum is often conditional on signing a settlement agreement giving up the right to bring claims. That may be a perfectly good deal — but understand what you are giving up.
Get the breakdown. Ask for the package split into statutory redundancy, enhanced redundancy, notice pay and holiday. The tax treatment differs for each and a single headline figure hides it.
Work out your statutory minimum as a baseline
Settlement agreements
Enhanced payments above a contractual entitlement usually come with a settlement agreement. Three things to know:
You must receive independent legal advice for it to be binding, and the employer normally pays a contribution towards that — typically £350 to £750. Use it; it costs you nothing and the adviser is acting for you.
They are negotiable. The first offer is rarely the final one, particularly where the process has been imperfect.
Check what else is in it. Agreed references, confidentiality clauses, and restrictive covenants are all commonly included and all negotiable.
If you think you have been underpaid
Start with the statutory minimum. That is a hard legal floor, and our redundancy calculator will give you the figure.
If you have been paid less than that, raise it immediately — an employment tribunal claim for unpaid statutory redundancy has a strict time limit, generally three months less one day from the termination date.
If the dispute is about an enhanced scheme, it is a contractual claim, and the argument turns on what the scheme actually says. Acas offers free advice, and their early conciliation service is a required step before most tribunal claims anyway.
Sources
- Redundancy: your rights — GOV.UK
- Redundancy pay — Acas
- Redundancy: tax and National Insurance — GOV.UK
Checked against source on 30 August 2026. This is general guidance, not legal advice. If you are offered a settlement agreement you are entitled to independent legal advice, usually paid for by your employer.
Written by Nathan Cole
I built the calculators on HoursHQ and check every statutory figure against GOV.UK, Acas and the legislation itself before it goes live. Where the law is genuinely unclear, I say so rather than guessing.