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Redundancy payments fall into two categories: statutory payments and non-statutory payments.

Statutory redundancy is the amount which must be paid by the employer to the employee under employment law and is a fixed amount for each year of service. Statutory redundancy pay is usually exempt from tax (see below).

Non-statutory redundancy payments are any other payment made by the employer to the employee on redundancy. The tax treatment of these payments is discussed in the How could a termination payment be taxed? guidance note.