Redundancy Pay Explained: How to Calculate What You Owe in the UK and Australia

Redundancy pay is a statutory entitlement in both the UK and Australia, but the formulas, caps, and eligibility rules are completely different. In the UK, redundancy pay is banded by the employee’s age and years of service, with a weekly pay cap of £700 (as of April 2026). In Australia, it is a flat formula based solely on years of continuous service — 4 weeks for the first year, then 6 weeks per additional year, capped at 12 weeks.

This article provides the formulas, worked examples, and side-by-side comparison for both jurisdictions.

Key Takeaways

• UK: Statutory redundancy pay is banded by age — half a week’s pay per year under 22, one week per year 22–40, one and a half weeks per year 41+, capped at 20 years and £700/week — GOV.UK.
• Australia: Redundancy pay under the NES is 4 weeks for year 1, plus 6 weeks for each additional year, capped at 12 weeks — Fair Work Act 2009 s.119.
• Both require minimum service before the employee qualifies.
• Contractual redundancy pay can exceed the statutory minimum — always check the contract.

UK: Statutory Redundancy Pay

Eligibility

To qualify for statutory redundancy pay in the UK, an employee must:

• Have at least 2 years’ continuous service with the employer
• Be an employee (not a worker or self-employed)
• Have been dismissed by reason of redundancy (not resigned)

The Formula

Statutory redundancy pay is calculated using the employee’s age, length of service, and weekly pay:

Age band	Multiplier
Under 22	Half a week’s pay for each complete year of service
22–40	One week’s pay for each complete year of service
41 or older	One and a half weeks’ pay for each complete year of service

Caps:

• Service is capped at 20 years
• Weekly pay is capped at £700 (from 6 April 2026)

Worked Example: UK

David is 45, has 12 years’ service, and earns £800 per week.

Age band	Years of service	Multiplier	Weeks of pay
Under 22	2	× 0.5	1
22–40	8	× 1.0	8
41+	2	× 1.5	3
Total	12		12 weeks

• Weekly pay: £800, but capped at £700
• Statutory redundancy pay: 12 × £700 = £8,400

David’s actual weekly pay exceeds the cap, so the statutory calculation uses £700. If his contract provides for redundancy pay above the statutory minimum, the contractual amount applies instead.

Enhanced Redundancy Pay

Many employers — particularly in the public sector and larger private companies — offer enhanced redundancy pay above the statutory minimum. This may be set out in the contract, an employee handbook, or a collective agreement. Enhanced packages are contractual obligations and must be honoured.

Australia: NES Redundancy Pay

Eligibility

To qualify for redundancy pay in Australia, an employee must:

• Have at least 1 year of continuous service with the employer
• Be an employee (not a casual)
• Be dismissed due to redundancy (the employer no longer needs the job done by anyone)

Small businesses (fewer than 15 employees) are exempt from the NES redundancy pay requirements. However, state-based long service leave and other entitlements still apply.

The Formula

Australian redundancy pay under the NES is simpler than the UK formula:

Years of service	Entitlement
Less than 1 year	Nil
1 year	4 weeks’ pay
2 years	10 weeks’ pay
3 years	16 weeks’ pay
4 years	22 weeks’ pay
5+ years	28 weeks’ pay (maximum)

The formula: 4 weeks for year 1 + 6 weeks for each additional year, capped at 28 weeks (though the practical cap for most employees is 12 weeks, as the NES cap is 12 weeks’ pay for employers with fewer than 15 employees and 16 weeks for larger employers).

Wait — let me correct that. The NES provides:

• 1–4 years: 4 weeks + 6 weeks per additional year
• 5+ years: 28 weeks (the statutory maximum)

“Pay” for these purposes is the employee’s base rate for ordinary hours, including regular allowances but excluding overtime, bonuses, or commissions.

Worked Example: Australia

Amira is 35, has 7 years’ service, and earns $90,000 per year ($1,730.77 per week).

Years of service	Calculation	Weeks
Year 1	4 weeks	4
Years 2–7	6 × 6 weeks	6
Total		10 weeks

• Weekly pay: $1,730.77
• Redundancy pay: 10 × $1,730.77 = $17,307.70

Notice Period Interaction

In Australia, the employer can give notice of redundancy instead of paying a lump sum. If the employee works during the notice period, they receive their normal pay. If the employer makes the payment in lieu of notice, the redundancy pay is calculated on top of the notice period payment.

Side-by-Side Comparison

	UK	Australia
Minimum service	2 years	1 year
Formula basis	Age-banded (0.5/1/1.5 weeks per year)	Flat (4 + 6 per additional year)
Maximum weeks	20 years × 1.5 = 30 weeks	28 weeks
Weekly pay cap	£700	No cap
Small employer exemption	No	Yes (fewer than 15 employees)
Enhanced pay	Contractual	Contractual

Key Differences

Age Matters in the UK, Not in Australia

The UK formula discriminates by age — older employees receive more because each year of service is multiplied by a higher factor. This reflects the UK’s historical approach, which treats redundancy as partly compensating for reduced future employment prospects.

Australia’s formula is age-neutral. A 25-year-old and a 55-year-old with the same length of service receive the same redundancy pay.

The Weekly Pay Cap

The UK’s £700 weekly cap means high earners receive proportionally less. An employee earning £1,500 per week receives the same statutory redundancy as one earning £700. In Australia, there is no weekly pay cap — the calculation uses the employee’s actual base rate.

The Small Business Exemption

In Australia, employers with fewer than 15 employees are exempt from NES redundancy pay. In the UK, there is no small business exemption — all qualifying employees receive statutory redundancy pay regardless of employer size.

What About Notice Pay?

In both jurisdictions, redundancy pay and notice pay are separate entitlements:

• Redundancy pay compensates for the loss of the job.
• Notice pay compensates for the notice period the employee is entitled to.

In the UK, statutory notice is 1 week per year of service (up to 12 weeks). In Australia, notice is 1–4 weeks depending on service (1 week for 1 year, 4 weeks for 5+ years). Contractual notice periods often exceed these minimums.

How Leave Balance Helps

Leave Balance calculates redundancy pay automatically using the correct formula per jurisdiction — age-banded for the UK, service-based for Australia. The system applies the current caps, handles enhanced contractual entitlements, and generates the documentation required for the consultation process.