Statutory vs Contractual Redundancy

What is statutory redundancy pay?

Statutory redundancy pay is the legal minimum that every employer in the UK must pay to eligible employees who are made redundant. It is calculated using a formula based on your age, weekly pay, and length of service — and there are maximum limits on both the weekly rate and the total amount you can receive.

The statutory formula: weekly pay × years of service × age multiplier. Calculate your statutory entitlement with our tool.

What is contractual redundancy pay?

Contractual redundancy pay — also called enhanced or contractual scheme redundancy — is any amount your employer pays above the statutory minimum. It is called "contractual" because the terms are written into your employment contract, staff handbook, or a standalone policy document.

If your contract or staff handbook says your employer will pay more than the statutory minimum in a redundancy situation, they are legally obliged to honour that commitment.

Common ways contractual schemes differ

Enhanced schemes typically improve on the statutory formula in one or more of the following ways:

• Higher multiplier per year of service — e.g. 2 weeks' pay per year instead of the statutory formula (which ranges from 0.5 to 1.5 weeks depending on age)
• No weekly cap — contractual schemes may not apply the statutory £751/week cap, meaning high earners can receive their full actual weekly pay
• Longer service counted — the statutory maximum is 20 years. Some schemes count all years without this ceiling
• Notice pay included — some schemes add contractual notice pay to the redundancy total, creating a larger payout
• Tax-free treatment — some employers structure enhanced payments to benefit from the same £30,000 tax-free treatment as statutory pay, though HMRC may treat this differently

Where to find your scheme terms

Check the following documents for your contractual redundancy terms:

• Your employment contract — look for a section on termination, severance, or redundancy
• Staff handbook — many large organisations publish a staff handbook that includes redundancy policy
• HR policies — your HR department should have a written policy on enhanced redundancy
• Intranet — many companies publish these documents on their internal HR portal

If you cannot find the document, ask your HR department for the redundancy policy. You are entitled to this information in writing.

What if your scheme has been frozen or changed?

Employers can change or freeze enhanced redundancy schemes, but they generally cannot do so unilaterally for existing employees without agreement. If your employer wants to reduce your contractual redundancy rights:

• They must consult with you and get your explicit agreement to the change
• If you do not agree, they may need to renegotiate or accept the existing terms
• If the scheme was inherited from a previous employer through a TUPE transfer, the original scheme terms generally transfer with you

If you are in a dispute about whether your employer is honouring a contractual scheme, ACAS can advise on next steps, and you may be able to bring a breach of contract claim in the employment tribunal.

Summary: how to know what you are owed

1. Calculate your statutory minimum using our calculator
2. Check your contract and staff handbook for an enhanced scheme
3. Calculate the enhanced amount using the contractual formula
4. Take the higher of the two — your employer must pay whichever is greater

If your employer offers less than either figure, challenge it in writing — ACAS (0300 123 1100) can advise on whether the offer is correct.