Council redundancy: discretionary compensation of up to 104 weeks' pay

Under the Local Government (Early Termination of Employment) (Discretionary Compensation) Regulations 2006, an English or Welsh council may pay more than statutory redundancy pay. It can lift the weekly pay cap in the statutory calculation, or pay a lump sum of up to 104 weeks’ pay. It does not have to. The regulations require each authority to publish its own policy, and the policy decides what you can expect.

Who the regulations cover

The rules apply to someone whose employment ends by reason of redundancy, in the interests of the efficient exercise of the authority’s functions, or because the other holder of a joint appointment has left. The person must have been employed by an employing authority, been eligible to be an LGPS member (whether or not they were one), and left on or after 1 October 2006. If you were not eligible for the LGPS, check with your employer, since the regulations are tied to LGPS eligibility.

Two powers

Regulation 5 lets the employing authority increase your statutory redundancy payment. The most it can add is the difference between your statutory payment and what you would have had if there were no limit on a week’s pay. GOV.UK says that for redundancies on or after 6 April 2026 weekly pay is capped at £751, and the maximum statutory redundancy pay is £22,530. Someone paid above that weekly figure can have the cap removed by this power.

Regulation 6 covers cases where you do not receive additional LGPS membership. The authority may, within six months of your termination date, decide to pay compensation of up to 104 weeks’ pay. A week’s pay is worked out as under the Employment Rights Act, without the statutory cap. If you receive statutory redundancy pay or compensation under regulation 5, that amount is deducted from the regulation 6 sum. The compensation is paid as a lump sum.

The policy your council must publish

Regulation 7 says each employing authority must formulate, publish and keep under review the policy it applies to these powers. If it changes the policy, the new policy cannot take effect until a month after publication. In writing the policy the authority must consider whether unrestricted use of its powers could lead to a serious loss of confidence in the public service, and be satisfied that the policy is workable, affordable and reasonable having regard to the foreseeable costs.

The regulations set a ceiling and not a rate, so the same power can produce different outcomes at different councils.

A hypothetical example

Say your gross pay works out at £800 a week and you are made redundant after the 6 April 2026 change. Statutory redundancy pay uses a weekly figure capped at £751, so the £49 above the cap is ignored for every year counted. Regulation 5 lets the council pay the difference between that capped result and the amount you would have had with no cap. Regulation 6 is separate: a lump sum of up to 104 weeks at your uncapped £800, with any statutory payment and any regulation 5 amount deducted. Whether the council pays either, and how much, depends on its policy. These figures are for illustration only and do not predict an offer.

Mistakes in payment

Regulation 8 says that if compensation is paid in error, the council must tell you in writing with details of the calculation. It makes a further payment for an underpayment, and for an overpayment it sets a reasonable period for repayment. It must take your known circumstances into account before trying to recover any overpayment. If you think your calculation is wrong, ask for the working in writing.

How it fits with your pension

The LGPS has its own rules for redundancy: if you are 55 or over with two years’ membership, your pension is paid without reduction, and the early and flexible retirement guide explains how. The regulations deal with the cash side. The compensation under regulation 6 is for people who do not get extra pension membership under the LGPS power to increase total membership.

Tax

Redundancy and termination payments have their own tax rules. The redundancy pay tax guide sets them out. HMRC or an adviser can look at your own case.

What to check

Ask HR for the council’s discretionary compensation policy in writing, before any settlement is agreed. Ask which of the two powers it uses, what multiple it applies, and whether the decision is made within six months. Check how your length of service is counted, including previous service with other bodies, covered by the continuity of service guide. A union representative can tell you how the policy works in practice, and ACAS can explain how to raise a concern about how the policy has been applied.