The Statutory Redundancy Pay Cap: Every Weekly Limit Since 1965

When an employee with two or more years' service is made redundant in Great Britain, the statutory minimum payment is worked out from age, length of service and a week's pay — but the week's pay used in the formula is capped. That cap is set by section 227 of the Employment Rights Act 1996 and, since 1999, has been uprated annually in line with the September retail prices index under section 34 of the Employment Relations Act 1999, through a yearly statutory instrument called the Employment Rights (Increase of Limits) Order. The same limit is used for several other employment rights, including the basic award for unfair dismissal.

Because official pages only ever show the current year's figure, the full history is surprisingly hard to assemble. Here it is — every limit, with its source.

The cap year by year, 2009–2026

Increases took effect on 1 February each year until 2013; since 2014 they take effect on 6 April, aligning with the tax year. The maximum payment is 30 times the cap — the most the formula can produce (20 years' service, all at ages 41+, earning 1.5 weeks per year). The limit was unchanged in 2010.

Sources: rows to 2022 are as recorded in HMRC's Employment Income Manual (EIM13760); the October 2009 uplift is SI 2009/1903; 2024, 2025 and 2026 are SIs 2024/213, 2025/348 and 2026/310 respectively. Percentages are calculated from the published limits. The 2023 rise of 12.6% reflects the September 2022 RPI spike.

Before 2009: from twice the average wage to below it

The cap is as old as the scheme itself. The Redundancy Payments Act 1965 introduced statutory redundancy pay with a limit of £40 a week — a deliberately generous ceiling at a time when average weekly earnings were £19.95, so the formula covered twice the average wage and the maximum payment was £1,200. The cap then lagged: it was not raised until 1974, and by the late 1990s annual upratings had brought it only to £220.

Put the two eras together and the arc is striking. In 1965 the capped week stood at around 200% of average weekly earnings. In 2026/27 the £751 cap sits almost exactly on the median full-time weekly wage — £751, from the ONS ASHE 2025 median full-time salary of £39,039. A scheme designed to replace the full pay of the typical worker (and then some) now covers no more than the middle earner's week, and anyone paid above the median loses part of every qualifying week.

Northern Ireland: a separate, higher cap

Northern Ireland sets its own limit through the Department for the Economy, under its own series of Increase of Limits Orders. For 2026/27 the Northern Ireland cap is £783 a week, giving a maximum statutory payment of £23,490 — against £751 and £22,530 in Great Britain. The two series have drifted apart because each jurisdiction applies its own uprating decisions.

The £30,000 tax-free limit: frozen since 1988

Separate from the weekly cap, a redundancy payment itself — statutory plus anything ex-gratia the employer adds — is free of income tax up to £30,000, under section 403 of ITEPA 2003. No employee National Insurance is due on a genuine termination payment at any amount; since April 2020 employers pay Class 1A NIC on the excess over £30,000, and since April 2018 any pay in lieu of notice is taxed as normal earnings regardless of how the package is labelled.

The threshold's history is short, because it stopped moving a generation ago. The exemption was fixed at £5,000 in 1960, raised to £10,000 in 1978, and after further upratings was set at £30,000 by the Finance Act 1988, for terminations from 6 April 1988. It has never been raised since — a 38-year freeze, with no uprating scheduled. While the redundancy cap nearly doubled between 2011 (£400) and 2026 (£751) just by tracking prices, the tax-free allowance stood still, and the two lines are now converging: in 1998 the statutory maximum of £6,600 used up barely a fifth of the exemption, while the 2026/27 maximum of £22,530 uses three-quarters of it. If the cap keeps rising with RPI and the exemption stays frozen, the statutory minimum alone will breach the tax-free limit within a decade — and £30,000 is already less than the median full-time annual salary. Fiscal drag, in other words, quietly taxes ever more of a typical large redundancy package. You can see the effect on your own numbers in the redundancy pay calculator, which applies the £30,000 rule to the whole package.

How the annual uprating works

Each year the Secretary of State must adjust the limits by the September-to-September change in the retail prices index, rounding the result — the mechanism in section 34 of the Employment Relations Act 1999. The order is laid in the spring and applies to dismissals on or after 6 April. Two quirks are worth knowing: the change uses RPI, not CPI, which is why the 2023 rise was a full 12.6%; and it applies to the dismissal date, so a redundancy that completes on 5 April is calculated on the old cap even if the payment arrives later.

Sources

Current limits: The Employment Rights (Increase of Limits) Order 2026 (SI 2026/310), SI 2025/348, SI 2024/213 and GOV.UK — Redundancy: your rights. Historic limits: HMRC Employment Income Manual EIM13760, SI 2009/1903, SI 1998/924 and the full order series on legislation.gov.uk. 1965–2009 history and earnings comparison: House of Commons Library, Research Paper 09/21 — Statutory Redundancy Pay (Amendment) Bill and Standard Note SN/BT/960 — Redundancy Pay. Northern Ireland: Department for the Economy announcement. Termination tax: ITEPA 2003 s.403, Commons Library CBP-8084 — Taxation of termination payments and Hansard, 12 July 1978. Median earnings: ONS, Annual Survey of Hours and Earnings 2025. See our full methodology and rates.

This page is a factual reference, checked against the legislation and official publications listed above. Limits shown apply to Great Britain unless stated; Northern Ireland differs. It is general information, not legal or financial advice — verify your own position against GOV.UK or a qualified adviser.

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