NHS Redundancy Pay Under Agenda for Change: How It Is Calculated

Redundancy is relatively rare in the NHS, but restructures, service closures and organisational mergers do happen. If you are affected, knowing how the payment is calculated helps you plan and check what you are offered. This guide covers the rules in Section 16 of the Agenda for Change handbook for staff in England.

The basic rule

You get one month's pay for each complete year of reckonable NHS service, up to a maximum of 24 months' pay. Part years are ignored. To qualify you normally need at least two years of continuous service.

What counts as a month's pay

A month's pay is whichever is better for you:

• One twelfth of your annual salary, or
• 4.35 times your weekly pay.

Annual salary here is counted as at least £23,000 and at most £80,000. If you earn less than £23,000 full time, your payment is worked out as if you earned £23,000. Higher earners are capped at £80,000. Both figures are scaled down for part-time staff.

Worked examples

Band 6 at the top point, ten years' service. Salary £48,117. A twelfth of salary is £4,009.75, but 4.35 weeks' pay is £4,025.17, so the higher figure is used. Ten months' pay comes to £40,251.72.

Band 2, eight years' service. Salary £25,272. A month's pay at 4.35 weeks is £2,114.08. Eight months comes to about £16,913.

Long service, high salary. Someone earning £120,000 with 30 years' service is capped on both counts: 24 months of pay, worked out on £80,000.

What counts as reckonable service

Continuous service with NHS employers usually counts, even if you have moved between trusts, provided there has been no break of more than 12 months. Service that has already been used for an earlier redundancy payment does not count again. Some service outside the NHS may count if your employer agrees.

Suitable alternative employment

Before making you redundant, your employer must look for suitable alternative employment. If you unreasonably turn down a suitable role, you may lose your redundancy payment. If you accept a new role, there is usually a trial period. Disagreements about what is suitable are common, so ask for advice from your union if you are unsure.

Early retirement instead of redundancy

If you are aged 50 or over and a member of the NHS Pension with enough membership, you may be able to take early retirement with an unreduced pension instead of a lump sum, depending on your circumstances and which section of the scheme you are in. This can be worth much more over the long term. Ask your pension adviser to compare the options.

Tax

The first £30,000 of a redundancy payment is usually tax free. Anything above that is taxed. Notice pay and holiday pay are taxed as normal pay, even if paid at the same time.

Notice and pay in lieu

Redundancy pay is separate from your notice period. Under Agenda for Change, your notice depends on your band and length of service, with a minimum set by law of one week for each year of service up to 12 weeks. Your employer may ask you to work your notice or pay you in lieu. Notice pay is taxed as normal earnings.

Redeployment

Most NHS organisations have a redeployment process that gives at-risk staff priority for suitable vacancies. If you are redeployed into a lower band, you may get pay protection for a period, depending on your employer's policy and the terms in Section 19 of the handbook. Pay protection can be worth more than a redundancy payment if you want to stay in the NHS.

Common questions

Can I volunteer for redundancy? Some organisations run voluntary redundancy schemes. The payment is usually calculated in the same way.

What if I get another NHS job straight away? If you start a new NHS job within four weeks of your contract ending, you may lose the right to your redundancy payment, or have to repay it, because your service is treated as continuous. Check the rules before accepting.

Does maternity leave affect my redundancy pay? No. Time on maternity leave counts as continuous service, and you have extra protection in a redundancy situation.

Common mistakes to avoid

• Counting a part year of service, which is not included.
• Forgetting the £23,000 floor, which makes payments for lower bands higher than a simple twelfth of salary.
• Accepting a new NHS role without checking the effect on your payment.

Estimate your payment

The redundancy pay calculator applies the month's pay rule, the floor and cap, part-time scaling and the 24-month limit for your band, hours and years of service. Use it to check any figure you are offered, and ask your HR team for a full breakdown.