NHS Redundancy Pay 2026/27: Statutory vs Contractual, Tax Rules & Pension Options

NHS staff on Agenda for Change contracts are entitled to enhanced redundancy pay — substantially more generous than the statutory minimum. The key differences: **Statutory (all UK employees):** ½ week per year under 22, 1 week per year aged 22–40, 1½ weeks per year aged 41+. Maximum 20 years. Capped at £643/week (2026/27). **NHS Contractual (AfC terms):** 1 month's pay per year of continuous NHS service. Based on actual monthly salary (no weekly cap). Maximum 24 years' service counted. Minimum 2 years' continuous service required.

The first £30,000 of any redundancy payment (statutory or contractual) is tax-free and NI-free. Amounts above £30,000 are taxed at your marginal income tax rate and subject to employer NI (from 2020 onwards, not employee NI). For a Band 7 nurse with 20 years' service receiving £82,312: • First £30,000: Tax-free • Remaining £52,312: Taxed at marginal rates (20%/40% depending on other income) • If received mid-year with ~£25,000 already earned: £25,270 at 20% = £5,054, £27,042 at 40% = £10,817 • Net redundancy pay: approximately £66,441 The exact tax depends on when in the tax year you receive the payment and your other income.

Redundancy triggers important pension choices depending on your age: **Under 55 (57 from 2028):** • Pension benefits are deferred until your Normal Pension Age • You can access them early (from age 55) but with actuarial reduction (~5% per year early) • Your accrued benefits continue to be revalued annually **Aged 55+ (compulsory redundancy only):** • You may be eligible for early pension release WITHOUT actuarial reduction • This is an extremely valuable benefit — it can add tens of thousands to your lifetime pension income • Applies only to compulsory redundancy (not voluntary, in most cases) • The pension is based on your accrued benefits at the date of leaving **Aged 55+ (voluntary redundancy):** • Early pension access with actuarial reduction • Some Trusts offer "added years" or employer contributions to enhance voluntary packages

Before redundancy is confirmed, your Trust must make reasonable efforts to redeploy you. Under AfC terms: • You're entitled to a minimum 4-week "redeployment period" (often longer in practice) • You should be offered suitable alternative roles within the Trust • If a role is at a lower band, you may receive pay protection for a period (typically 12–24 months) • Refusing a "suitable alternative" role without good reason can forfeit your redundancy entitlement • "Suitable" considers your skills, location, hours, and terms — not just any vacant post Document everything during the redeployment process. If you believe the Trust hasn't made genuine efforts, this strengthens any subsequent challenge.

Most NHS reorganisations try to avoid compulsory redundancy through redeployment, voluntary redundancy (VR), natural turnover, or recruitment freezes. Key differences: **Voluntary Redundancy:** • You choose to accept (it's not forced) • Packages may be MORE generous than contractual terms (enhanced terms) • May affect Jobseeker's Allowance eligibility (HMRC may consider you voluntarily unemployed) • Usually no early pension without actuarial reduction **Compulsory Redundancy:** • Imposed after redeployment efforts fail • Terms are the contractual minimum (1 month per year) • Full Jobseeker's Allowance eligibility • May trigger unreduced early pension at 55+ Always compare VR terms with compulsory terms before accepting.

Under employment law and AfC terms, you're entitled to: • 90 days' collective consultation if 100+ staff are affected (30 days for 20–99 staff) • Individual consultation meeting with right to be accompanied (union rep or colleague) • Written reasons for your selection for redundancy • Access to the selection criteria and scoring • Reasonable time off to attend interviews for other roles • Right of appeal against selection • Notice period (contractual or statutory — whichever is longer) If any of these are not followed, you may have grounds for an unfair dismissal claim. Contact your union immediately if you believe the process is flawed.