NHS Redundancy Pay Calculator
Compare your NHS contractual redundancy entitlement with statutory redundancy, including tax-free thresholds.
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⚠️ Important
You must have at least 2 years of continuous service to qualify for redundancy pay. NHS contractual terms (1 month per year, max 24 years) are significantly more generous than statutory minimums.
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How NHS Redundancy Pay Works
NHS Contractual: 1 month's actual salary per complete year of continuous NHS service, up to a maximum of 24 years. No weekly cap — based on your real salary.
Statutory: ½ week per year (under 22), 1 week per year (22–40), 1½ weeks per year (41+). Weekly pay capped at £643. Maximum 20 years.
Tax: The first £30,000 of redundancy pay is tax-free and NI-free. Amounts above £30,000 are taxed at your marginal rate — we estimate 40% here.
NHS Contractual Redundancy Explained
Under the Agenda for Change (AfC) framework, NHS contractual redundancy is significantly more generous than the statutory minimum. The formula is straightforward: 1 month's actual salary × completed years of continuous NHS service, up to a maximum of 24 years.
Key Features of the AfC Formula
- No weekly cap — unlike statutory redundancy, your payment is based on your real salary with no artificial weekly limit.
- Monthly salary basis — your annual salary ÷ 12. All pensionable pay elements are included.
- Maximum 24 years — service beyond 24 years does not increase your entitlement further.
- Minimum salary floor — a floor of £23,615 (Band 2 entry point, 2026/27) is applied if your salary is somehow lower.
- Maximum effective payment — 24 years × monthly salary. For a Band 9 top increment (£129,783), that equates to approximately £259,566.
Continuous Service Rules
- Service must be unbroken NHS employment to count towards your redundancy entitlement.
- Gaps of less than one week between NHS contracts are preserved and do not break continuity.
- Transfers between NHS bodies (e.g. moving from one Trust to another) count as continuous service.
- Service with some non-NHS public sector employers may also count — check your contract.
- Career breaks agreed with your employer typically preserve continuity but may not count as reckonable service.
Statutory Redundancy — The Legal Minimum
Statutory redundancy pay is the legal minimum all UK employers must offer. Most NHS staff receive the far more generous contractual terms above, but it's useful to understand the baseline for comparison.
| Age During Year of Service | Entitlement Per Year |
|---|---|
| Under 22 | Half a week's pay |
| 22 to 40 | One week's pay |
| 41 and over | One and a half weeks' pay |
Weekly pay cap: £643 (2025/26) — regardless of your actual earnings.
Maximum years counted: 20 years of service.
Maximum statutory payout: £19,290 (30 weeks × £643).
Minimum service: You must have at least 2 years of continuous employment.
Tax on NHS Redundancy Pay
Understanding the tax treatment of your redundancy payment is critical for planning your finances after leaving the NHS. Here's how HMRC treats termination payments in 2026/27.
✅ Tax-Free (First £30,000)
- The first £30,000 of your total termination payment is completely tax-free.
- It is also free from National Insurance contributions.
- This £30k threshold covers the combined total of contractual and statutory — not each separately.
⚠️ Taxable (Above £30,000)
- Any amount exceeding £30,000 is taxed at your marginal rate via PAYE.
- Employer NI is also due on the excess above £30,000.
- Your employer will deduct tax before paying you.
Pay in Lieu of Notice (PILON): Always fully taxable and subject to NI — it does not benefit from the £30,000 exemption.
Pension contributions: Not deducted from redundancy pay. Your pension is a separate entitlement.
Tip: If your total payment is close to £30,000, ask your employer if any elements (e.g. outplacement support) can be provided separately as a non-cash benefit.
MARS — Mutually Agreed Resignation Scheme
MARS is a voluntary alternative to compulsory redundancy that many NHS Trusts offer during restructuring programmes. It allows staff to leave by mutual agreement, often with the same financial terms as redundancy.
How MARS Works
- It is voluntary — you apply; it cannot be imposed.
- The payment calculation is the same as contractual redundancy (1 month per year, max 24).
- Often processed faster with less bureaucracy than compulsory redundancy.
- No redeployment period is required.
Things to Know
- MARS may be offered during restructuring even if your specific role isn't at risk.
- Not all Trusts offer MARS — it depends on organisational need and budget.
- Accepting MARS means you resign; you are not dismissed for redundancy.
- The same £30,000 tax-free threshold applies.
MARS can be a good option if you're already planning to leave or move to a different sector. Always seek independent financial advice before accepting.
Redundancy and Your NHS Pension
Your NHS pension is one of the most valuable parts of your total reward package. What happens to it upon redundancy depends largely on your age and which pension scheme you belong to.
Aged 55 or Over at Redundancy
This is a major benefit. If you are made redundant at age 55 or over, you can access your NHS pension immediately with no early retirement reduction. Your pension is paid in full as if you had reached your normal pension age.
This applies to all NHS pension schemes (1995, 2008, and 2015). It represents a significant financial advantage that can be worth tens of thousands of pounds over your retirement.
Under 55 at Redundancy
- Your pension is preserved as a deferred benefit, payable at your Normal Pension Age (NPA).
- In the 2015 scheme, NPA is linked to your State Pension age (currently 67 for most staff).
- Check if your service qualifies for the 85-year rule (1995 scheme only) — if your age + years of service ≥ 85, you may access benefits earlier.
Pension Strain Cost
In some cases, your employer may offer to pay the "pension strain" cost — a lump sum paid to the NHS Pension Scheme to remove or reduce the early retirement reduction on your pension. This is more commonly offered during organisational restructuring and is a highly valuable benefit. Always ask about this during redundancy consultations.
Worked Examples — NHS vs Statutory Redundancy
These examples illustrate the difference between NHS contractual redundancy and statutory redundancy across typical pay bands. All figures use 2026/27 pay scales.
Band 5 — 8 Years — Age 30
Annual salary: £32,073
8 × £2,673/month — entirely within the £30k tax-free threshold
8 × £617/week
Band 7 — 15 Years — Age 45
Annual salary: £47,802
15 × £3,984/month — £30k tax-free, ~£11,901 estimated tax on excess
18.5 weeks × £643 (capped weekly rate, age 41+ years earn 1.5x)
Band 3 — 4 Years — Age 25
Annual salary: £24,939
4 × £2,078/month — entirely tax-free
4 × £480/week
Figures are estimates based on 2026/27 AfC pay scales. Tax calculations assume the higher rate (40%) for amounts exceeding £30,000. Your actual entitlement may vary depending on contract terms and Trust policies.