Personnel Today
  • Home
    • All PT content
    • Advertise
  • Email sign-up
  • Topics
    • HR Practice
    • Employee relations
    • Equality, diversity and inclusion
    • Learning & training
    • Pay & benefits
    • Wellbeing
    • Recruitment & retention
    • HR strategy
    • HR Tech
    • The HR profession
    • Global
    • All HR topics
  • Legal
    • Case law
    • Commentary
    • Flexible working
    • Legal timetable
    • Maternity & paternity
    • Shared parental leave
    • Redundancy
    • TUPE
    • Disciplinary and grievances
    • Employer’s guides
  • AWARDS
    • Personnel Today Awards
    • The RAD Awards
    • OHW Awards
  • Jobs
    • Find a job
    • Jobs by email
    • Careers advice
    • Post a job
  • XpertHR
    • Learn more
    • Products
    • Pricing
    • Free trial
    • Subscribe
    • XpertHR USA
  • Webinars
  • OHW+

Personnel Today

Register
Log in
Personnel Today
  • Home
    • All PT content
    • Advertise
  • Email sign-up
  • Topics
    • HR Practice
    • Employee relations
    • Equality, diversity and inclusion
    • Learning & training
    • Pay & benefits
    • Wellbeing
    • Recruitment & retention
    • HR strategy
    • HR Tech
    • The HR profession
    • Global
    • All HR topics
  • Legal
    • Case law
    • Commentary
    • Flexible working
    • Legal timetable
    • Maternity & paternity
    • Shared parental leave
    • Redundancy
    • TUPE
    • Disciplinary and grievances
    • Employer’s guides
  • AWARDS
    • Personnel Today Awards
    • The RAD Awards
    • OHW Awards
  • Jobs
    • Find a job
    • Jobs by email
    • Careers advice
    • Post a job
  • XpertHR
    • Learn more
    • Products
    • Pricing
    • Free trial
    • Subscribe
    • XpertHR USA
  • Webinars
  • OHW+

Employment lawOpinionRedundancy

Increasing statutory redundancy pay would hit manufacturers hard

by Personnel Today 26 Mar 2009
by Personnel Today 26 Mar 2009

In these difficult economic times, manufacturers are looking for the government to support them by reducing the costs of running their businesses or, at the very least, not increasing them.

However, the Private Member’s Bill on statutory redundancy pay that has been put forward by Labour MP Lindsay Hoyle – the Statutory Redundancy Pay (Amendment) Bill – would have just the opposite effect. The EEF strongly opposed this Bill when it had its second reading in the House of Commons earlier this month.

An employee’s statutory redundancy pay is calculated by using a formula that takes into account their age and length of service. This formula results in a number of weeks’ pay, which is then multiplied by the employee’s weekly pay subject to a maximum of, currently, £350 per week. This maximum week’s pay is uprated annually by the government in line with inflation, with this figure then being rounded up to the nearest £10.

However, the Work and Families Act 2006 also gives the business secretary the power to make a ‘one off’ increase in the maximum week’s pay used in this formula, instead of the figure arising out of this annual uprating exercise.

This unprecedented power was introduced by the government as the way in which it could implement part of the so-called Warwick Agreement; reached by the Labour Party and trade unions prior to the last general election. This stated, rather vaguely, that there would be ‘the uprating of redundancy pay’.

Hoyle’s Bill seeks to implement this part of the deal by raising the maximum week’s pay that is used to calculate statutory redundancy pay from £350 per week to the level of average earnings; currently £574 per week for full-time employees. This figure would then be increased annually in line with the movement in average earnings which, historically, has tended to rise faster than inflation.

This proposal would increase substantially the level of statutory redundancy pay for all employees earning more than £350 per week, although employees earning less than this would receive no financial benefit. The Bill would therefore have a disproportionate impact on manufacturers, as their workforce generally enjoys higher rates of pay than employees in many other sectors.

A number of manufacturers also have supplementary redundancy pay arrangements that have often been agreed with their unions. These manufacturers would face even higher cost increases as these supplementary arrangements are often a multiple of their employees’ entitlement to statutory redundancy pay and would be very difficult to change.

Since the Bill would provide no financial benefit for employees who are earning less than £350 per week, it seems to be at variance with the objective of ‘protecting vulnerable workers, supporting good employers’ that was set out in the government’s Success at Work policy statement for this Parliament, published in March 2006. The EEF supports this objective and recognises that vulnerable workers need to be provided with adequate protection.

One way in which the method of calculating statutory redundancy pay could be changed to try to meet this objective would be to introduce a minimum weekly pay of, say, £200 per week when calculating an employee’s entitlement to statutory redundancy pay. However, if this change was to be introduced, it would have to be accompanied by the withdrawal of both Hoyle’s Bill and the provisions in the Work and Families Act that give the secretary of state the power to make an increase in the maximum week’s pay used to calculate statutory redundancy pay.

In this way, the government could achieve its objective of protecting vulnerable workers as well as removing the serious concerns of manufacturers that, in these difficult economic times, they might be faced with a substantial increase in the cost of making employees redundant.

David Yeandle, head of employment policy, EEF

Avatar
Personnel Today

previous post
NHS staff-on-staff violence a relatively small story, says DoH workforce chief
next post
Employment law changes April 2009: what the experts say

You may also like

Workforce wellbeing and job design: Stephen Bevan talks...

17 Jun 2022

How HR can mitigate the risks and reap...

10 Jun 2022

Oxford study highlights best gig economy firms to...

9 Jun 2022

The outdated views of the anti-hybrid working brigade

9 Jun 2022

Tesco appeal against fire and rehire ban to...

8 Jun 2022

Bank holidays: six things employers need to know

5 Jun 2022

Top 10 HR questions May 2022: Bank holidays

1 Jun 2022

P&O Ferries boss denies reputational damage after mass...

27 May 2022

Employers lack data to make IR35 worker status...

25 May 2022

Maternity leave: Cost of living crisis highlights need...

25 May 2022
  • NSPCC revamps its learning strategy with child wellbeing at its heart PROMOTED | The NSPCC’s mission is to prevent abuse and neglect...Read more
  • Diversity versus inclusion: Why the difference matters PROMOTED | It’s possible for an environment to be diverse, but not inclusive...Read more
  • Five steps for organisations across the globe to become more skills-driven PROMOTED | The shift in the world of work has been felt across the globe...Read more
  • The future of workforce development PROMOTED | Northumbria University and partners share insight...Read more
  • Strathclyde Business School expands its Degree Apprenticeship offer in England PROMOTED | The University of Strathclyde is expanding its programmes...Read more
  • The Search for Talent: Six Major Employer Pitfalls PROMOTED | The Great Resignation continues unabated...Read more
  • Navigating the widening “Skills Confidence Gap” in 2022, and beyond PROMOTED | Cornerstone OnDemand conducted a global study...Read more
  • Apprenticeships are the solution to your recruitment problems PROMOTED | Apprenticeships have the pulling power...Read more

Personnel Today Jobs
 

Search Jobs

PERSONNEL TODAY

About us
Contact us
Browse all HR topics
Email newsletters
Content feeds
Cookies policy
Privacy policy
Terms and conditions

JOBS

Personnel Today Jobs
Post a job
Why advertise with us?

EVENTS & PRODUCTS

The Personnel Today Awards
The RAD Awards
Employee Benefits
Forum for Expatriate Management
OHW+
Whatmedia

ADVERTISING & PR

Advertising opportunities
Features list 2022

  • Facebook
  • Twitter
  • Instagram
  • Linkedin


© 2011 - 2022 DVV Media International Ltd

Personnel Today
  • Home
    • All PT content
    • Advertise
  • Email sign-up
  • Topics
    • HR Practice
    • Employee relations
    • Equality, diversity and inclusion
    • Learning & training
    • Pay & benefits
    • Wellbeing
    • Recruitment & retention
    • HR strategy
    • HR Tech
    • The HR profession
    • Global
    • All HR topics
  • Legal
    • Case law
    • Commentary
    • Flexible working
    • Legal timetable
    • Maternity & paternity
    • Shared parental leave
    • Redundancy
    • TUPE
    • Disciplinary and grievances
    • Employer’s guides
  • AWARDS
    • Personnel Today Awards
    • The RAD Awards
    • OHW Awards
  • Jobs
    • Find a job
    • Jobs by email
    • Careers advice
    • Post a job
  • XpertHR
    • Learn more
    • Products
    • Pricing
    • Free trial
    • Subscribe
    • XpertHR USA
  • Webinars
  • OHW+