Calls for redundancy payments to increase
With the recession biting-hard and more and more job losses being announced, pressure is mounting on the Government to consider raising the maximum limit on a week’s pay used when calculating statutory redundancy payments. Other suggestions include reducing the qualifying period for a redundancy payment and increasing the tax free limit for termination payments.
The maximum limit on a week’s pay, which is used when calculating a statutory redundancy payment (SRP), was increased to £350 where the relevant date for calculation fell on or after 1 February 2009. But in real terms, since its introduction in 1965, the maximum limit for a SRP has decreased from 203% of average weekly earnings to just 56%. £10,500 is currently the maximum amount of a statutory redundancy payment, but this requires an employee to have worked for their employer for 20 years after the age of 41.
In light of the current economic climate, 57 MPs signed a Commons motion tabled by Labour MP Lindsay Hoyle, urging the Government to raise the £350-per-week cap to make a one-off increase to the maximum week’s pay to £500. There is a power in S.14 of the Work and Families Act 2006 to increase the maximum amount of a week’s pay on one occasion only, for the purposes of calculating statutory payments (including redundancy pay), which could be used for this purpose.
A further option for consideration raised by the DBERR with the Chancellor ahead of the Budget this spring is to reduce the qualifying period for a statutory redundancy payment from two years to just one. Another suggestion is to raise the tax-free limit for enhanced redundancy payments. Since 1988 the first £30,000 has not be subject to tax but the TUC wants it raised to £50,000.
This provides summary information and comment on the subject areas covered. Where employment tribunal and appellate court cases are reported, the information does not set out all of the facts, the legal arguments presented and the judgments made in every aspect of the case. Employment law is subject to constant change either by statute or by interpretation by the courts. While every care has been taken in compiling this information, we cannot be held responsible for any errors or omissions. Specialist legal advice must be taken on any legal issues that may arise before embarking upon any formal course of action.