When a job ends because the employer no longer needs it, many workers are entitled to a lump sum. What that sum is called, who qualifies and how big it is depend heavily on the country. The UK has a precise statutory formula; the US has almost none at federal level; many other countries have generous rules written into labour codes. This guide focuses on the UK and US, with a short note on other systems.
This is general information, not legal advice. For your own situation, check GOV.UK, ACAS, the US Department of Labor or an employment lawyer.
UK statutory redundancy pay: who qualifies
You are normally entitled to statutory redundancy pay if you:
- are an employee (not a self-employed contractor or, usually, an agency worker),
- have at least two full years of continuous service with the employer, and
- are dismissed because of genuine redundancy: the business is closing, the workplace is closing, or fewer employees are needed for your type of work.
You can lose the right if you unreasonably refuse a suitable alternative job offered by the employer, or if you are dismissed for misconduct.
The formula
Statutory redundancy pay is based on full years of service, counted backwards from the dismissal date, and your age during each year:
| Age during the year of service | Weeks’ pay per full year |
|---|---|
| Under 22 | 0.5 week |
| 22 to 40 | 1 week |
| 41 and over | 1.5 weeks |
Two caps apply:
- Service: only the last 20 years count.
- Weekly pay: capped at £751 in England, Scotland and Wales for dismissals on or after 6 April 2026 (it was £719 before). In Northern Ireland the cap is £783.
The maximum statutory payment in Great Britain is therefore 20 years × 1.5 weeks × £751 = £22,530.
“A week’s pay” is your normal gross weekly pay. If your hours or pay vary, it is an average of the previous 12 weeks.
Worked example 1
Sam is 45, has worked for the company for 10 full years and earns £800 a week gross.
- The 10 years were worked at ages 35 to 44.
- Years at ages 35–40: 6 years × 1 week = 6 weeks.
- Years at ages 41–44: 4 years × 1.5 weeks = 6 weeks.
- Total: 12 weeks.
- Weekly pay is capped at £751, so redundancy pay = 12 × £751 = £9,012.
Worked example 2
Priya is 28, has 5 full years’ service and earns £520 a week.
- Years at ages 23–27: 5 × 1 week = 5 weeks.
- Weekly pay is under the cap: 5 × £520 = £2,600.
Worked example 3
Jordan is 21 with exactly 3 years’ service on £400 a week.
- Years at ages 18–20: 3 × 0.5 week = 1.5 weeks.
- Redundancy pay: 1.5 × £400 = £600.
What else you are owed
Statutory redundancy pay is only part of the package. On top of it, you are normally entitled to:
- Notice pay: at least one week per full year of service, up to 12 weeks (statutory minimum), or your contractual notice if longer. Employers often pay it as “payment in lieu of notice”.
- Holiday pay for leave accrued but not taken.
- Wages up to the leaving date, including any overtime and bonus due.
- Enhanced redundancy pay if your contract or company policy promises more than the statutory amount (for example, actual weekly pay with no cap).
Tax on termination payments
- Statutory and enhanced redundancy pay are tax-free up to £30,000 in total.
- Notice pay, payment in lieu of notice, holiday pay and bonuses are taxed and subject to National Insurance as normal earnings.
Consultation rules
If an employer proposes 20 or more redundancies at one establishment within 90 days, it must collectively consult with employee representatives (at least 30 days before the first dismissal, or 45 days for 100 or more). Failing to do so can lead to a protective award.
US severance pay
The US has no federal requirement to pay severance. According to the Department of Labor, the Fair Labor Standards Act does not require it; severance is a matter of agreement between employer and employee. It is typically paid when:
- an employment contract or offer letter promises it,
- a union agreement includes it,
- the employer has a written severance plan (often covered by ERISA), or
- the employer offers it in exchange for signing a release of claims.
A common rule of thumb in US companies is one to two weeks’ pay per year of service, but this is policy, not law.
The WARN Act
The federal Worker Adjustment and Retraining Notification (WARN) Act requires employers with 100 or more employees to give 60 calendar days’ notice of plant closings and mass layoffs. If they fail to, affected employees can claim back pay and benefits for up to 60 days. Several states, including California and New York, have their own “mini-WARN” laws with wider coverage.
Before signing a separation agreement
- Check the deadline: workers aged 40 and over must generally get 21 days to consider a release (45 days in group layoffs) and 7 days to revoke it, under the Older Workers Benefit Protection Act.
- Understand what claims you are giving up.
- Ask about health insurance continuation (COBRA), unused paid time off and equity vesting.
Other countries in brief
- Türkiye: kıdem tazminatı is 30 days’ gross pay per year of service after one year, subject to a ceiling that changes every six months. Our Turkey severance pay calculator applies the current ceiling.
- Spain: unfair dismissal compensation is 33 days’ pay per year (max 24 months); objective dismissal is 20 days per year (max 12 months).
- Saudi Arabia and the UAE: end-of-service gratuity is set out in the labour law and depends on years of service and basic wage.
- Germany: there is generally no legal right to severance (Abfindung); it is usually negotiated, often around half a month’s pay per year of service.
Checklist
- Confirm you have two full years’ continuous service (UK).
- Count each full year and the age you were during it.
- Apply the £751 weekly cap (dismissals from 6 April 2026) and the 20-year limit.
- Add notice pay, holiday pay and outstanding wages separately.
- Remember the £30,000 tax-free limit applies to redundancy pay, not notice pay.
- In the US, read your contract and any severance plan before signing a release.
For counting years and days of service precisely, see our guide to counting days between dates.