Calculating voluntary severance payment

See also: guidance on voluntary severance procedures

In certain circumstances, Voluntary Severance Pay may be offered. In such cases, Voluntary Severance pay is paid instead of Statutory Redundancy Pay (SRP), and includes within it any entitlement to SRP.

Voluntary severance payments are calculated using the same age bands as statutory redundancy pay in order to determine the number of weeks' pay. A locally-agreed multiplier of 1.75 is then applied. Unlike SRP, voluntary severance pay is based on the actual amount of a week's basic pay (for example, it is not capped).

Where a period of service spans more than one age band, the payment will be determined using a separate calculation for the service falling in each of the relevant age bands.

  Statutory redundancy Voluntary severance
Qualifying service 2 years of continuous service 1 year of continuous service
Weekly pay Capped, and annually reviewed. Use the government calculator to find out the current rate for SRP. No limit (use actual week’s pay, basic salary only)
Payment for each full year of service, where the employee’s age was: under 22 0.5 of a week’s pay *0.88 of a week’s pay
22 – 40 1 week’s pay *1.75 weeks’ pay
41 and over 1.5 weeks’ pay *2.63 weeks’ pay
Maximum number of years’ service 20 20
Maximum number of weeks’ pay 30 52.6

 

*Note: 

Statutory redundancy pay is based on the employee’s age and length of service. Government guidance issued following the introduction of the Employment Equality (Age) Regulations 2006 confirmed that this approach is objectively justified and therefore lawful.

 

Employers are therefore permitted to base voluntary severance payments on SRP calculations and to apply a locally determined multiplier.

 
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