How to Calculate Redundancy Pay

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Redundancy pay is a popular concept in Europe, especially in the United Kingdom. This is a payment that the company makes to its terminated employees. The company may have reorganized itself and no longer requires the services of these employees. Redundancy pay takes into account the salary of the employee while in service, the length of his employment with the company and his age at the time of termination.

  • Collect all the necessary data on the terminated employee. You will need to know her last pay as an employee of the organization, her age and the duration she worked with the organization.

  • Calculate the number of weeks for which the employee is eligible to be paid. This is computed by using the following formula: "Coefficient of Pay as per age x Number of years of service with the organization." In the case of an employee who is under 22 years of age, she is entitled to 0.5 week's wages. In the case of an employee who is between 22 and 41 years of age, she is entitled to one week's wages. In the case of an employee who is 41 years or older, she is entitled to 1.5 week's wages.

  • Multiply the number of weeks calculated in Step 2 with the weekly wages that the employee was paid while in service. The maximum amount of weekly pay eligible for redundancy payments is £380. As of February 2011, the amount is £400.

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