Budget 2009: statutory redundancy pay to increase to £380 a week

Statutory redundancy pay will increase from £350 per week to £380 per week, the chancellor’s Budget has confirmed.

Alistair Darling did not say when this rise would come into force, but said the measure was necessary to help the increasing number of people being made redundant due to the recession.

However, Martin Warren, head of employment law at Eversheds law firm, warned the changes would be “unwelcome news” for employers struggling to make ends meet during the economic slowdown.

“This enhancement will be unwelcome news for employers, many of whom are struggling to stay afloat in difficult circumstances. The impact will also be greater for some businesses that offer employees agreed enhanced redundancy payment schemes that use statutory redundancy pay as the starting point for calculating payments.”

Statutory redundancy payments are calculated using a formula based on the employee’s usual weekly pay. The amount of pay taken into account is capped and increases on an index-linked basis annually. The new level of £380 per week is still below the average weekly pay, which stands at £505.

“Raising the cap on statutory redundancy pay could increase the likelihood that younger workers – who typically earn less and have fewer years of service – would be selected for redundancy because their entitlements tend to be lower. However, this strategy could be counterproductive for employers and have a negative impact on the sustainability of the business in the longer term,” Warren said.

Other measures outlined in the Budget statement today:

Unemployment

The Budget also unveiled £1.7bn funding for job centres to combat the growing number of unemployed. This is £300m less than the figure predicted by business groups, however it meets the CBI’s demand that an extra £150m-per-year was needed to support job centres to deal with a surge in demand to get people back to work.

The government will give £500m extra support to kick-start building on housing projects stalled by the credit crunch, which will create more jobs. Another £100m will be given to support local authorities to run sustainable housing projects. This is far short of the £20bn called for by the British Chambers of Commerce (BCC).

Youth unemployment

However, the chancellor outlined several measures to combat youth unemployment, as several lobby groups such as the Work Foundation had called for. Under 25s that have been out of work for more than a year will get job or training, Darling confirmed. Some 250,000 jobs will be made available in hard-to-fill vacancies, such as social care, as predicted yesterday.

Official figures out this morning revealed the number of people out of work has escalated to 2.1 million, the worst figures since Labour came to power in 1997.

Government HR job cuts/restructuring

The chancellor announced that public borrowing will rise to £175m this year, as think-tanks, including the Work Foundation, predicted. Some £15bn annually will be saved by 2013-14, the chancellor confirmed, but he did not go into detail on how. Thousands of HR and other back-office jobs are expected to go as a result, according to a report out yesterday and a leaked letter earlier this year.

‘Green’ jobs

A further £1bn will be given to subsidise low-carbon and green jobs, but again, the chancellor did not put a figure on how many jobs would be created.

Skills

The government did not go into detail on skills or whether the government’s flagship Train to Gain programme will be made more flexible for larger employers, as employment bodies had called for. Nor did he mention whether tax credits will be available for employers that train their staff, as the BCC wanted. HR directors’ wishes have not been granted regarding awarding cash-back for firms that train their staff.

Tax/regulation

Companies can continue to defer tax bills. For small businesses, the government will delay the increase in corporation tax. Also, loss-making companies can reclaim their tax in past three years – this could amount to £4,000 each year, available for two years until 2010.

There was no mention of specific employment laws, including the Agency Workers Directive and the Equality Bill.

Short-time working

The chancellor ignored calls from the Chartered Institute of Personnel and Development, the CBI, and manufacturers’ body the EEF to introduce subsidies for short-time working.


For a summary of what the Budget statement said relating to employers and HR professionals, visit the Personnel Today live coverage blog.

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