NHS redundancy pay

What England's notional earnings are worth

Paragraph 16.8 in the England section adds three things the other nations' section does not have: a notional full-time earnings floor of £23,000, a ceiling of £80,000, and an overall cap of £160,000. The same service, on the same salary, pays differently either side of the border.

The floor helps low earners in England and the ceiling costs high earners there. In the middle — most of the Agenda for Change bands — the four nations agree exactly.

Three rules that quietly change the answer

Part-years are discarded entirely. Paragraph 16.9 does not round and does not apportion: eleven years and eleven months counts as eleven years, and the eleven months are simply gone. It is the only place in the calculation where anything is dropped.

A month's pay is "whichever is the more beneficial" of 4.35 times a week's pay, or a twelfth of annual salary (16.7). For a flat annual salary the weekly multiple is very slightly the larger — 4.35/52 against 1/12, about 0.4% — so that is the one that applies. The result above says which was used.

England's bounds are tested against full-time-equivalent pay, then pro-rated. Someone on £12,000 for half a week has a full-time equivalent of £24,000, which is above the floor — so the floor does not lift them. Testing the floor against actual pay instead would raise the payment wrongly.

Service with a previous NHS employer counts

A month per complete year of reckonable service — and paragraph 12.1 puts continuous previous service with any NHS employer into that count, naming redundancy alongside maternity, sick pay and annual leave. Someone with four years at one trust and six at another is on ten, not six — which at the top of the scale is the difference between a few months' pay and a year's.

Voluntary redundancy pays the same

Volunteering does not change the sum. The handbook places a voluntary redundancy under Section 16, the same as a compulsory one (it says so in 20.5), so the figure above applies either way. A mutually agreed resignation is different, and is set out below.

MARS: the mutually agreed resignation scheme

A MARS is not a redundancy. You resign, your employer agrees, and you are paid a severance sum instead (handbook 20.5). Schemes are run locally. The handbook’s principles, and everything below, cover England; Scotland, Wales and Northern Ireland have their own arrangements, held by their health departments (20.4). In England, NHS England approves each scheme, or reviews it for a foundation trust, and your employer does not have to accept an application (20.11).

The handbook sets no rate (20.26). NHS England publishes a national model and recommends schemes that match it or pay less. Its scale, in months of basic salary for complete years of reckonable service:

A scheme may use a different rate, so its own terms are the ones that count. From 4 years’ service the model pays less than a Section 16 redundancy would for the same service: at 10 years, 5 months against 10.

• Caps. The salary used is capped at £80,000, pro rata if you work part time, and no payment is over £80,000.
• Who can apply. At least 12 months’ continuous NHS service. A scheme stays open for 3 months at most.
• No notice pay. You leave on a date you agree. If notice is not worked, some or all of the payment may be taxed as post-employment notice pay.
• Coming back. Work for the NHS in England again within 1 month — bank and agency included — and you repay the whole payment. Within 6 months, and before the months you were paid for run out, you repay the part not yet used up.
• A later redundancy. If an NHS employer makes you redundant later, the MARS payment is offset against that redundancy payment, so the years it paid for are not paid for again (20.18).
• Legal advice. You must take independent legal advice before signing the settlement agreement. Your employer may pay up to £400 including VAT towards it.

The handbook also lists things to check before resigning: welfare benefits, mortgage protection insurance that does not cover resignation, your pension, lease car penalties and multi-post contracts (20.8). This page does not work out a MARS payment, and does not say whether to take one.

Questions people ask

England and the other three nations have separate versions of Section 16 with the same rules below. Paragraphs 16.3 to 16.10 share their numbers; from 16.20 on, the other nations’ numbers are three lower, so England’s 16.20 is their 16.17.

Do I get NHS redundancy pay with less than two years’ service?

No. Paragraph 16.3 needs at least 2 years of continuous service, full time or part time — written as 104 weeks in the other nations’ version. Below that there is no Section 16 payment at all, however the redundancy happened.

Does a break between NHS jobs count?

It depends which question is being asked, because Section 16 asks two. To qualify, your service has to be continuous: a gap between NHS employers breaks it if it is a full week, Sunday to Saturday, or longer — in the other nations’ wording, longer than a week (16.4). To work out how much, an earlier period still counts if the gap was twelve months or less (16.5). What never counts is service already used for an earlier redundancy payment, or for NHS pension benefits you have taken — after retire and return, for example (16.6). So a long NHS career does not always count in full, and the final count is your employer’s to make.

Are ICB and NHS England staff covered?

For Section 16, an NHS employer is any organisation in Annex 1 of the handbook (16.3), and England’s list includes Integrated Care Boards and NHS England alongside NHS trusts. So staff there on Agenda for Change terms are made redundant under the same rules, and time at an ICB, NHS England or a trust is all NHS service for the count above.

What if I am offered another job?

Then there may be no payment. You lose it if, by your leaving date, you have taken suitable alternative work with the same or another NHS employer starting within four weeks, or if you unreasonably refuse to accept or apply for it (16.20). “Suitable” is judged against your personal circumstances, though you are expected to show some flexibility (16.22). The offer has to reach you in writing before your leaving date, with reasonable time to think; if you do not apply for one that does, that counts as refusing. If you accept, you get the trial period the Employment Rights Act allows (16.23).

Can I leave early for a job outside the NHS?

Yes, if no suitable NHS job is available. During your notice your employer will release you on a date you both agree, unless there are compelling reasons not to, and that date becomes your redundancy date for the calculation (16.24 and 16.25). Leaving before your notice ends without being released this way loses the payment (16.20).

Do I have to pay it back if I go back to the NHS?

Section 16 sets one condition. When you claim, you confirm that you had not taken, been offered or unreasonably refused suitable NHS work within four weeks of leaving, and you agree to refund the payment if that turns out not to be true (16.26). Beyond those four weeks the handbook sets no repayment rule for a redundancy — but the years it paid for are spent, and will not count towards a later one (16.6). A MARS payment is different: it has its own clawback, set out above.

What is the most NHS redundancy can pay?

24 months’ pay, because service counts up to 24 years in every nation. England adds two limits the others do not have: the earnings used are capped at £80,000 full time, and no payment is over £160,000, both pro rata for part-time staff (16.8).

Is NHS redundancy based on gross pay?

Yes. A month’s pay is the better of 4.35 weeks’ pay or a twelfth of your annual salary on your leaving date (16.7), both before tax. The calculator above shows which was used.

Is NHS redundancy pay taxed?

The calculator works out the gross lump sum and not the tax. Part of a genuine redundancy payment is normally free of tax and National Insurance, up to a threshold set by HMRC, and the rest is not; GOV.UK’s guide gives the threshold, and says the tax on the rest depends on what your leaving payment includes, such as holiday pay or unpaid wages. This site holds no record of that threshold, so it does not print one.

Does a pay rise after I leave count?

Yes. If a backdated pay award is announced after your leaving date, the redundancy payment is worked out again and the difference paid (16.27).

How long do I have to claim, and what if I disagree?

Claims have to be made within six months of your leaving date (16.26). If you disagree with the amount, or a claim is turned down, the route is your employer’s grievance procedure (16.28).

What about my pension if I am over 50 or 55?

Section 16 lets NHS Pension Scheme members who are made redundant retire early (16.10). It needs at least two years’ continuous service, two years’ qualifying membership of the scheme, and minimum pension age: 55 for most members, or 50 for some who had that right on 5 April 2006 and kept the protection. In England the lump sum is used to buy out the reduction for taking the pension early; in the other nations, early retirement is instead of the lump sum. This page does not work that out — it is a pension decision, and this site does not give pension advice.

What this does not cover

Early retirement on grounds of redundancy, and using the payment to buy out a pension reduction (16.10 onwards), are out of scope and will stay out: that is a pension decision, and this site does not give pension advice. Statutory redundancy pay is a separate and smaller scheme. The rest of a redundancy package, such as notice pay and untaken holiday, is not worked out here, and nor is tax on the lump sum.