Statutory redundancy pay increase

Mark Minns, 26 May 2009

Statutory redundancy pay to is to increase increase, possibly from October 2009.

The current cap on a week's pay for the purposes of calculating statutory redundancy pay is £350. Many small employers cannot afford to pay in excess of the minimum statutory entitlement, or choose not to do so. Ordinarily the cap on a week's pay is increased in April of each year, and usually rises by a small amount each time.

Given the current climate, there has been a good deal of commentary on whether the statutory cap on a week's pay should be increased. In his recent budget the Chancellor announced that the cap would be increased to £380. It has not yet been confirmed when this increase will become effective, but it is possible that it may will from October 2009.

Some will say that this increase is nominal, and broadly consistent with the increase that would have been applied in April in any event. Some will also say that the increase will be of marginal significance in relieving hardship, but of course the Chancellor not only has to consider the needs of the individual employee, but the cost to the employer.

For an employee with five year's service that is made redundant (and is aged 35 at the time), the additional payment will be £150, and so the payment will increase from £1,750 to £1,900.
This also means the most that can be paid as a statutory redundancy payment will be £11,400 (up from £10,500). Of course, many employers have in place enhanced redundancy terms, and these can be paid without deduction provided that the total paid does not exceed £30,000.

The TUC had argued that the figure should be increased to £500, but it seems that this is unlikely for the foreseeable future.