Lawyers say redundancy pay cut fears unfounded

Lawyers have played down fears that forthcoming age discrimination legislation will ban employers from paying higher levels of redundancy pay to over-41s.

Last week, the TUC raised concerns that older workers could face reduced statutory redundancy payments if the government decides to reduce awards to the levels currently paid to younger employees to comply with the legislation.

In its response to the government consultation on the directive, which comes into force next October, the TUC said that a fairer solution would be to bring younger employees up to the higher redundancy rate.

“It would be a real shame to spoil this advance [the outlawing of age discrimination] by levelling statutory redundancy payments so that workers of all ages get the same lower rate,” said TUC general secretary Brendan Barber. “It sends the wrong signal to employers who may feel free to cut other benefits to their older staff in the same way.”

But Owen Warnock, employment law partner at Eversheds, said it would be “perfectly permissible” for UK law to continue to make extra financial provisions for workers over-41 when they are made redundant.

“The directive clearly states that age discrimination – which this practice clearly is – can be justified in special circumstances, such as special protection for older workers when they are dismissed,” said Warnock. He said any rules preventing employers from paying higher rates of redundancy would have a major knock-on effect.

How current redundancy pay is calculated lows:

  • Half a week’s pay for each year of employment age 18-21

  • One week’s pay for each year of employment age 22-40

  • One-and-a-half week’s pay for each year age 41-64

  • If the date of termination of employment (or the date when the notice period expires) falls between the 64th and 65th birthday, payment is reduced by a 12th for each month of completed service over 64.

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