Redundancy alternative scheme proposed by CBI

The government should introduce an 'Alternative to Redundancy' (ATR) scheme as part of a package of labour market reforms that would help tackle spiralling unemployment, the CBI has recommended.

The scheme would give organisations the choice to use the existing redundancy path, or to place an employee on ATR for a set period of up to six months. The employee would not work during that time, but would be paid an ATR allowance equal to twice the rate of Jobseeker's Allowance - paid half by the government, and half by the employer.

The scheme allows the firm to take the employee back into work when the ATR period expires or if business improves earlier. If demand fails to pick up, then full redundancy rights are preserved, and would include the six months' extra service.

John Cridland, CBI deputy director-general, said: "We considered various forms of wage subsidy and support for short-time working, but this approach is better. Businesses will be more able to cope with sharp drops in demand and prepare for recovery, while workers benefit from improved financial support and a door that is kept open for six months.

"This is not about businesses ducking their redundancy responsibility - in fact if a scheme runs for six months and a redundancy is still made, then the business will end up paying more."

The CBI report, in association with engineering and technology giant Siemens, also warns that levels of employment regulation are at a "tipping point". It predicts unemployment will peak at 3.03 million in the second quarter of 2010.

The business group also set out other recommendations:

• A review of the length of consultation time for redundancies, currently 90 days where 100 or more employees face redundancy in a three-month period.
• Defer the 2011 hike in employer National Insurance contributions.
• All future employment law should be tested by this question: how will this help create sustainable jobs?