Redundancy pay increase

Morrish SolicitorsEmployment, Site News, UncategorisedLeave a Comment

In the 2009 Budget the Government announced that the limit for statutory redundancy pay would increase from £350 to £380. The increase takes effect from 1st October 2009. This means that anyone made redundant after that date will receive a maximum of £380 for each year of service (although those who are 41 and over  receive an extra ½ weeks pay for each year of service over the age of 41). Ordinarily, since 1999, an annual up rating has been applied each February to the redundancy pay cap to keep the figure in line with the Retail Price Index (rounded up to the nearest £10).

So at first sight, on this occasion, this “leap” appears to be a welcome increase designed to assist the ever increasing number of employees losing their jobs during this recession.

However, closer inspection and consideration would lead anyone to realise that this figure is by no means generous. First, consider that an individual’s entitlement to redundancy pay is based upon their gross wage. Therefore, anyone who earns more than £380 before tax per week automatically has their redundancy payment capped at £380. The annual salary which produces a weekly wage of £380 is £19,760; or just over £1,600 per month.

Secondly, according to the Office for National Statistics the average weekly gross wage in 2008 was £479. The current statutory redundancy payment clearly falls considerably below that figure.

From these figures it is plain to see that a large number of individuals will receive less than their gross weekly wage for each year of service if they are unlucky enough to be made redundant.

As can often be the case once you “do the maths” it is self- evident that many individuals suddenly facing no job, but who have families to support, mortgages payments to meet and bills to pay are left with substantially less than what they are used to receiving. Bear in mind that it is not just “fat cats” with plenty of rainy day savings who are affected; but ordinary individuals who may never have had the luxury, whilst they were working, to save money for times when they are not.

Finally, it is interesting to see that the up rating referred to above is suspended until February 2011.

Maybe not such a generous step after all?

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