Employers Planning Redundancies face Increased Costs

Employers Planning Redundancies face Increased Costs

Small firms intending to lay off staff face increased costs, following a rise in statutory redundancy payments.

Since the 1st February, the amount employers must pay staff who qualify for the maximum redundancy payment increased from £330 per week to £350 per week. Redundancy payments are calculated according to the employee’s age and number of years’ continuous employment with the business.

Employees are required to have two years’ continuous service to be entitled to a redundancy payment.

According to law firm Mace and Jones partner, Mark Hatfield, many employers will have rushed to make their redundancies before 1 February in order to make cost savings.

"Many employers had made plans to make redundancies and knew they had to do it between Christmas and February to save the extra money," said Hatfield. "However, plenty of business owners are getting on with making redundancies now, despite the increase.

"Business owners must get redundancy right, if they decide to do it, because there are very set legal procedures that are there to be followed," he added.

British Chambers of Commerce (BCC) spokeswoman Fiona Cunningham said that the Government should reconsider increasing costs for businesses in times of recession.

"This is a standard increase that happens each year and which normally wouldn’t make a difference to small firms," said Cunningham. "Obviously in the recession, any extra cost is more noticeable and perhaps the Government should consider this when enforcing these routine increases.

"However, it is doubtful that this will deter businesses from making redundancies," she added. "Firms need to lay off staff to improve their cashflow and the small increase in redundancy payments is less of a cost to them than continuing to pay the salary of a staff member they might no longer need."

From 1 February, the maximum possible award in an unfair dismissal case also increased, rising from £72,900 to £76,700.

Further information on the increase of statutory payment limits can be found at the Office of Public Sector Information (OPSI), specifically The Employment Rights (Increase of Limits) Order 2008

Find out more about redundancy by reading the business advice articles on Redundancy, Dismissing Employees, Disciplinary, Dismissal & Grievance Procedures and also Employment Law: the Basics.

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