Cost of redundancy rises for employers

Employers will find it more costly to make workers redundant from today, as the maximum caps on statutory redundancy pay and unfair dismissal compensation are increased.

Morag Hutchison, employment lawyer at Pinsent Masons, explains why we are seeing a rise in the cost of redundancies and outlines the elements that make up redundancy costs.
Despite a fall in the maximum compensation award for unfair dismissal cases last year, employers may now face bigger payouts, with the maximum award rising from £65,300 to £68,400.

The limits on payouts for unfair dismissal reflect the rise in the Retail Prices Index for the previous year.

Maximum statutory redundancy pay has also increased from £11,400 to £12,000, based on a rise on the maximum weekly wage figure used to calculate the amount given to employees who are made redundant.

Although maximum statutory redundancy pay normally rises annually in February, it has not risen since 1 October 2009.

Stephen Simpson, senior employment law editor at XpertHR, explained: “The amounts have started going up again, after a lull for employers brought on by the recession. Generally, the story for employers is that it is getting more expensive to make staff redundant, and will cost more if they get it wrong and face an unfair dismissal claim.”

Use XpertHR’s free ready reckoner chart to calculate statutory redundancy payments.

If you are looking for more advanced guidance, XpertHR has also launched a redundancy pay calculator to help employers work out statutory redundancy payments or enhanced payments in accordance with the provisions in the Equality Act 2010 (subscription required).

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