NHS redundancy pay 2026/27

How NHS redundancy pay is worked out

Section 16 of the Agenda for Change handbook sets the rules in England. They are more generous than the legal minimum, and they work differently.

• You need two years’ continuous NHS service. It can be with one or more NHS employers, as long as no break between jobs was longer than one week.
• Earlier NHS service counts after a break of up to 12 months. Service already used for an earlier redundancy or MARS payment does not count again. Non-NHS service counts only if your employer agrees, usually when you join.
• Only full years count. Eleven years and ten months is eleven years.
• A month’s pay is whichever is higher of one-twelfth of your annual salary when you leave, or 4.35 times a week’s pay under the Employment Rights Act. It is based on your normal working hours, so regular unsocial hours payments count. Overtime normally does not, unless your contract makes you work it.
• The cap is 24 years. Service beyond that adds nothing.

What each band could get

These use the top of each band in England in 2026/27, full time, with basic pay only. Unsocial hours payments in your normal pattern would add to them.

A part-timer gets the same months, worked out on their part-time pay. A Band 5 at the top on 22.5 hours (60%) with 10 years would get about £19,522.

The £23,000 floor and £80,000 ceiling

Since April 2015, NHS redundancy pay in England is worked out as if your full-time salary were at least £23,000 and at most £80,000. Part-timers have both limits applied to the full-time figure first, then scaled down.

The floor does not affect anyone on the 2026/27 pay scale, because even Band 2 pays £25,272. The ceiling starts to bite at Band 8c’s middle point (£84,346). From there up, each year of service is worth £6,667 however much you earn, so the most anyone can receive is £160,000.

NHS redundancy pay against the legal minimum

Take a Band 6 at the top of the band, earning £48,117, aged 45 with 15 years’ service.

The NHS payment includes the statutory amount; you do not get both. Here it is worth £47,379 more than the law requires.

Tax on NHS redundancy pay

The first £30,000 of a redundancy payment is tax-free. Anything above that is taxed as income in the tax year you are paid, so it can push part of it into a higher band. In the example above, £30,146 would be taxable. No National Insurance is charged on the redundancy payment itself.

Notice pay, holiday pay and any pay in lieu of notice are different. They are taxed and have National Insurance taken like normal wages, even when they are paid at the same time.

The guide to tax on redundancy pay shows how the taxable part is worked out through payroll.

Retiring early instead of taking the lump sum

If you have reached minimum pension age and have two years’ NHS Pension membership, you can ask to take your pension early without the usual reduction. The cost to the scheme is paid out of the redundancy payment you would otherwise get.

• If the cost is less than your redundancy payment, you get the pension and the difference as cash.
• If the cost is more, you have a one-off chance to pay some or all of the gap yourself.

Your employer works out the cost through NHS Pensions. Ask for the figures in writing before you choose, and compare them with the NHS pension calculator and what redundancy does to your pension.

Suitable alternative jobs and the 4-week rule

Your employer must look for a suitable alternative job before making you redundant. Whether a job is suitable depends on how close it is to your current work, its pay, hours, status and location, and your own skills and circumstances. If you unreasonably turn down a suitable offer, you can lose your redundancy pay.

If you have a suitable job with any NHS employer when your contract ends, and it starts with no break or a break of four weeks or less, you get no redundancy payment. Your service carries on unbroken instead, so it still counts if you are made redundant later. If you are pregnant or on maternity, adoption, shared parental or neonatal leave, you must be offered a suitable vacancy where one exists.

MARS is not redundancy

A Mutually Agreed Resignation Scheme lets you choose to leave for a payment when your post is not being cut. Under the national model, it pays half a month’s basic salary per full year of service, with a minimum of 3 months and a maximum of 12. You need at least 12 months’ continuous service.

It is roughly half what redundancy pays. The Band 6 in the example would get about £30,073 under MARS against £60,146 if made redundant. If you return to the NHS in England within six months, and before the months you were paid for have run out, you may have to pay some back. Service you are paid MARS for cannot count towards a later redundancy payment.

Scotland, Wales and Northern Ireland

The £23,000 floor and £80,000 ceiling apply only in England. Scotland, Wales and Northern Ireland use their own version of Section 16 with the same core terms: one month’s pay per full year of reckonable service, at least two years’ continuous service, and up to 24 years counted. Check your employer’s redundancy policy for local detail.

Before you sign anything

Ask HR for a written statement of your reckonable service date and the month’s pay they have used, and check both against your payslips and any earlier NHS jobs. If you are offered another NHS job, find out its start date, because starting within four weeks means no payment. If you are over minimum pension age, get the early retirement figures before you decide.