The formula
How to calculate severance package
A severance package usually combines three things: statutory redundancy pay, pay for the notice period, and sometimes an additional settlement in exchange for signing an agreement. They are taxed differently.
Statutory redundancy uses an age-banded multiplier — half a week per year for service under 22, one week from 22 to 40, one and a half weeks from 41. Service is capped at 20 years and weekly pay at a statutory maximum reviewed each April.
The calculator asks for:
- Complete years of service (years) — capped at 20 years for statutory redundancy
- Weekly pay — capped at the statutory maximum for the redundancy element
- Weeks per year of service — 0.5 for years under 22, 1 for 22–40, 1.5 for 41 and over
- Notice weeks (weeks)
- Additional settlement
The result updates on every keystroke. The URL updates too, which makes the filled-in version easy to bookmark or send to someone else.
The order the fields are filled in makes no difference to the result — the calculator recomputes the whole formula from whatever is currently in every field, not step by step. That means it is safe to adjust one number, watch the result change, and adjust it back, without worrying about resetting anything first.
Why severance package matters
The formula behind severance package is standard and has not changed in decades; what changes is the situation it gets applied to. Two households can run the identical calculation and land on very different conclusions once their own numbers — income, rate, term, balance — are dropped in, which is why a generic textbook example is less useful than a calculator you can adjust to match your own circumstances.
It is also useful as a sense check before signing anything. A quote, an offer letter or a spreadsheet from someone else can contain an error, an optimistic assumption, or simply a different convention for rounding — running the same inputs through an independent calculator is a quick way to confirm a number before relying on it.
It is also worth being clear about what a single figure like this can and cannot settle on its own. It answers the specific question the formula was built to answer, and nothing more — a favourable severance package result does not automatically mean a decision is a good one overall, since plenty of other factors that a formula cannot capture, from personal circumstances to how comfortable a commitment feels, usually matter just as much as the arithmetic. Use the number as one solid input among several rather than the whole of the decision.
A calculator like this one is often bookmarked and returned to repeatedly over months rather than used once, particularly for anything tied to an ongoing plan such as a mortgage, a savings goal or an investment being tracked. Because the figures live in the web address rather than only in memory, coming back to the same page with updated numbers is quicker than starting from a blank spreadsheet each time.
Worked example
Work through the defaults on this page:
- Complete years of service: 9 years
- Weekly pay: 700
- Weeks per year of service: 1
- Notice weeks: 9 weeks
- Additional settlement: 5,000
That gives:
- Redundancy element: 6,300
- Total package: 17,600
- Potentially tax-free portion: 11,300
These figures are only the calculator's own starting values, included so the working is visible rather than hidden inside the tool above. Replace them with your own numbers and the same arithmetic applies — nothing about the method changes, only the inputs feeding it.
Reading the result
The first £30,000 of genuine redundancy and ex-gratia payments is free of income tax and National Insurance. Notice pay never qualifies, and neither does anything owed under the contract such as holiday or bonus.
Where this goes wrong. A settlement agreement usually waives your right to bring a claim, and you must take independent legal advice before signing — the employer normally pays a contribution towards that. Take it before you agree to anything.
A useful check on any unfamiliar result is to compare it against a rough mental estimate first — round the inputs to convenient numbers and see whether the calculator's answer lands in roughly the same territory. A wildly different figure usually means one of the fields was entered in the wrong unit, most often a percentage typed as a whole number where a decimal was expected, or the reverse.
Statutory redundancy requires two years of service and is calculated on age-banded weeks per year, with both service and weekly pay capped. Many employers pay enhanced terms above the statutory minimum.
The first £30,000 of a genuine redundancy payment is free of income tax and National Insurance. Notice pay, holiday pay and contractual bonuses are taxed in full regardless of how the package is labelled.
It returns redundancy element. With 9 years complete years of service, 700 weekly pay and 1 weeks per year of service, that comes to 6,300. Change any field and the figure moves with it.
Whenever one of the underlying figures changes — a new interest rate, a different balance, an updated term — since the result only reflects what is currently in the fields. There is no need to keep a separate record of past results; the web address for a filled-in version already carries the figures used to produce it.
Not unless a tax rate or a fee is explicitly one of the inputs above. Where it is not, the figure shown is a gross calculation, and any tax due depends on your personal circumstances and current tax rules, which are worth checking separately.
The arithmetic itself is exact — the calculator applies the formula shown above precisely, with no rounding until the final figure is displayed. The uncertainty, where it exists, is entirely in the inputs: an estimated rate or an approximate balance carries that same approximation through to the result.