An NHS redundancy payment calculator will hand you a number in seconds. What it rarely explains is the scheme behind that number. NHS redundancy pay does not follow the statutory formula most UK employers know. It runs on Section 16 of the NHS Terms and Conditions of Service Handbook, the contractual scheme agreed under Agenda for Change. The rates are higher. The service rules are wider. And there is a clawback condition that catches people out. 

This article explains the Section 16 rates, how service is counted, and how the clawback works. It also covers why this matters if you run a business that touches the NHS without being part of it. Every figure is drawn from the NHS Terms and Conditions of Service Handbook and GOV.UK. This is educational explanation, not legal advice on any individual case. 

Why an NHS redundancy payment calculator shows bigger numbers than GOV.UK 

Two schemes sit on top of each other. Every qualifying employee in the UK has a statutory redundancy entitlement. NHS staff on Agenda for Change terms also have a contractual entitlement under Section 16. The contractual payment is an enhancement, and the statutory payment is offset against it. The employee receives one lump sum, not two. 

That offset matters. A common mistake is to add the statutory figure to the Section 16 figure. Paragraph 16.1 of the handbook is clear that the statutory payment sits inside the contractual one. If a calculator adds them together, it is wrong. 

The statutory scheme is the floor. It pays between half a week's pay and one and a half weeks' pay per full year, depending on age. Service is capped at 20 years. From 6 April 2026, weekly pay is capped at £751 and the maximum statutory payment is £22,530 in Great Britain, per GOV.UK. Northern Ireland sets its own statutory caps under separate legislation, so check the current NI figures if you employ there. Our redundancy calculator works the statutory figure out for you at the April 2026 rates. For the wider statutory process, including consultation duties, see our guide to statutory redundancy rights and consultation periods. 

The NHS scheme is the enhancement. Here is what it pays. 

Section 16 rates: one month's pay per year of service 

The core formula in the England section of the handbook is short: 

1. The employee needs at least two years of continuous service to qualify. 
2. The payment is one month's pay for each complete year of reckonable service. 
3. Reckonable service is capped at 24 years, so the maximum is 24 months' pay. 
4. Fractions of a year are dropped. Nine years and eleven months counts as nine. 

A month's pay is whichever is more beneficial: 4.35 times a week's pay calculated under sections 221 to 224 of the Employment Rights Act 1996, or one twelfth of annual salary at termination. For most salaried staff the 4.35 route pays slightly more. Multiply it out and 4.35 weeks is about 8.37 per cent of annual salary, against 8.33 per cent for the one-twelfth route. Small difference per year, but it compounds across a long service record. 

Two boundaries shape the calculation: 

1. An earnings floor. Anyone earning under £23,000 full-time equivalent is treated as earning £23,000, pro-rated for part-time staff. 
2. An earnings ceiling. Anyone earning over £80,000 full-time equivalent is treated as earning £80,000. No payment can exceed £160,000, pro rata. 

Take a worked example with the inputs stated. A nurse earns £40,000 and has ten complete years of reckonable service. A week's pay is £769.23. A month's pay is 4.35 times that, £3,346.15, which beats one twelfth of salary at £3,333.33. Ten years gives a payment of around £33,460. 

Now run the same person through the statutory formula. Say they are 45, so four of those years attract one and a half weeks and six attract one week, which is 12 weeks in total. Their week's pay is capped at £751. The statutory figure is £9,012. The Section 16 payment is nearly four times higher, and the £9,012 sits inside it as the statutory element. 

One version note. People still search for an NHS redundancy calculator 2025 edition. The Section 16 rates above have not changed since 1 April 2015. What changes each April is the statutory cap underneath, which rose to £751 in April 2026. If a calculator page shows an older cap, its statutory element is out of date. 

How Agenda for Change service counts differ from statutory 

This is where NHS redundancy pay diverges most sharply from the statutory scheme, and where generic calculators go wrong. 

Statutory redundancy pay counts continuous service capped at 20 years, and moving employers normally resets the clock. The NHS is an exception here too. The Redundancy Payments (National Health Service) (Modification) Order 1993 preserves statutory continuity for staff who move between listed NHS employers without a qualifying break. 

The NHS scheme counts service across the NHS. It uses two different measures, and they are not the same thing: 

1. Continuous service decides whether the employee qualifies at all. Previous employment with any NHS employer counts, provided no break between jobs was a week or more, measured Sunday to Saturday. 
2. Reckonable service decides how big the payment is. It includes employment with the present or any previous NHS employer. A break of up to 12 months does not wipe out the service before it. Time as a GP trainee under the Trainee Practitioner Scheme counts too. Employers even have discretion to count relevant service outside the NHS. 

Two exclusions stop double counting. Service already used for a previous NHS redundancy payment cannot count again. Neither can employment already taken into account for NHS pension benefits the person has received. 

The practical effect is large. Someone with three years at their current trust may carry another 15 years of reckonable service from earlier NHS jobs. A calculator built on ordinary statutory rules sees three years, and even the statutory element can see more where the modification order preserves continuity across NHS moves. Section 16 sees eighteen. If you model the cost of an NHS-terms redundancy using statutory assumptions, you will be wrong by a multiple, not a margin. 

NHS redundancy clawback: the four-week rule 

The word clawback worries people more than any other part of the scheme. Here is what the handbook actually says. 

There is no entitlement to a redundancy payment where the employee is offered, before the termination date, suitable alternative employment with their own or another NHS employer, and it starts within four weeks of the termination date. Unreasonably refusing such an offer, or failing to apply for a post properly brought to their attention, has the same effect. So does being dismissed for misconduct, or resigning before notice expires without an agreed early release. 

The clawback mechanism itself sits in the claims process. Before the payment is made, the employee signs a certificate. They confirm they have not obtained, been offered or unreasonably refused suitable alternative NHS employment within four weeks of termination. They undertake to refund the payment if that condition turns out not to be satisfied. Take the money on a Friday, start a new NHS job the following Monday, and the former employer can require the payment back. 

Three details are worth knowing: 

1. The four-week rule points at NHS employment. Starting a job with a private employer, a charity or a non-NHS public body inside four weeks does not remove the entitlement under Section 16. 
2. Early release changes the maths. An employee under notice can ask to leave early for an outside job. The agreed leaving date becomes the new redundancy date, and the payment is recalculated to that date. 
3. Claims have a deadline. A claim for a redundancy payment must be submitted within six months of termination. 

For employers administering the scheme, the certificate is not paperwork to skip. Keep it with the termination file. Diarise the four-week window before releasing funds where the process allows. Recovering an overpaid lump sum months later is far harder than holding a payment for a fortnight. And put the repayment condition in writing in the redundancy confirmation letter, so nobody can say they never knew. 

One caution for anyone reading during a reorganisation. Section 16 is the baseline scheme. Specific national programmes can attach additional repayment conditions to exit packages, so always check the current handbook text and any programme guidance in force at the time. 

Pensions change the shape of the payout 

For active NHS Pension Scheme members with two years' qualifying membership at or above minimum pension age, redundancy opens a choice. They can take the lump sum as cash and preserve the pension. Or they can exchange the lump sum to buy out some or all of the reduction applied when a pension is drawn early. If the lump sum is bigger than the buy-out cost, the balance is paid as cash. 

Tax follows the normal termination rules. GOV.UK confirms statutory redundancy pay under £30,000 is not taxable, and what is due on the rest depends on what the termination payment includes. Anyone weighing the pension option should take regulated financial advice. That is outside HR territory and outside this article. 

What this means for employers outside the NHS 

You do not need to run a hospital for Section 16 to reach your payroll. Three routes bring it to smaller employers, and this is where we see the expensive surprises. 

First, TUPE. Win a contract to deliver an NHS service and staff may transfer to you on their existing Agenda for Change terms. Contractual redundancy terms generally transfer with them. If you later restructure, your redundancy cost for those employees is modelled on Section 16 terms, not the statutory scheme. Price that into the bid, not the aftermath. 

Second, incorporation by contract. GP practices, community providers and social care businesses often mirror Agenda for Change in their employment contracts. If your contracts state that NHS terms and conditions apply, you may have adopted the redundancy scheme along with the pay scales. A contract does not need the word redundancy in it to bite. A general incorporation clause can be enough. Read what your contracts actually incorporate before you assume statutory rates apply. 

Third, hiring ex-NHS staff. The four-week certificate is the employee's obligation to their former NHS employer. Recruiting someone three weeks after their NHS exit creates no liability for you as a non-NHS employer. It may cost them their payment if your organisation counts as an NHS employer under the handbook, so expect strong candidates to check. 

Two boundary notes. The figures in this article come from the England section of the handbook. Scotland, Wales and Northern Ireland have their own Section 16 provisions, so check the right nation's text. And redundancy driven by long-term sickness is a different exercise with its own traps. Our ill health redundancy guide for employers covers that ground. 

Check the scheme before you check the calculator 

A calculator is only as good as the rules behind it and the service history you feed it. For NHS-linked employers, the risk is rarely the arithmetic. It is not knowing which scheme applies to which employee until the restructure is already moving. 

If redundancy is on your horizon, start with the basics. Know what your contracts incorporate. Know each employee's full service history, not just their time with you. Run the statutory numbers through our redundancy calculator, and treat any inherited NHS terms as a separate, bigger line. 

Then look at the wider picture. The free HR Health Check lets you know where your HR risks sit in under one minute, redundancy exposure included. It is the fastest way to find the gap before the gap finds you.