Understanding Redundancy Pay
What is Redundancy?
Redundancy occurs when your job is no longer needed by the employer. This is different from dismissal and typically entitles you to redundancy pay based on your length of service and salary.
How Redundancy Pay is Calculated
1
Statutory Redundancy Pay
For each full year of service you're entitled to:
- Age 22-40: 1 week's pay per year
- Age 41+: 1.5 weeks' pay per year
- Under 22: 0.5 week's pay per year
2
Notice Pay
Payment in lieu of notice period as per your contract. Calculated based on your salary and remaining notice period.
3
Additional Entitlements
May include accrued holiday pay, pro-rated bonus, and any contractual redundancy pay above statutory minimum.
Important Notes
- You must have at least 2 years continuous service to qualify
- Maximum weekly pay for calculation is capped
- Maximum service considered is 20 years
- Tax-free up to ₹3,00,000 in India
- Consult HR or legal advisor for exact calculations
Frequently Asked Questions
Q: Is redundancy pay taxable?
A: In India, up to ₹3,00,000 is tax-free under Section 10(10B) of Income Tax Act.
Q: What if I get another job immediately?
A: You're still entitled to redundancy pay unless you accept alternative employment with the same employer.
Q: Can I negotiate redundancy package?
A: Yes, many employers offer enhanced packages. This calculator shows statutory minimum.
Calculation Formula
Statutory Redundancy Pay =
Years of Service × Age Factor × Weekly Pay
Where:
- Weekly Pay = Annual Salary ÷ 52
- Age Factor = 0.5 (under 22), 1 (22-40), 1.5 (41+)
- Max Service = 20 years
- Max Weekly Pay = Capped amount