Payouts risk for employers who don’t know redundancy law

Thousands of UK employers are at risk from redundancy claims because they are unaware of the basic laws governing job cuts, a survey has found.

A poll of 200 businesses by law firm Pinsent Masons found that more than one third (37%) were considering redundancies in the next six month, but 84% of them were unaware of the correct length time required to consult with employees.

Another 28% of respondents were not aware that failure to consult employees could result in a penalty against the company, forcing it to pay up to 90 days’ salary for every affected employee.

Tom Flanagan, employment partner at Pinsent Masons, said the potential for claims against businesses from employees was enormous.

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“Companies are leaving themselves open to claims from employees and unions if the redundancy process isn’t carried out correctly,” he said. “These figures show there is a level of complexity surrounding collective redundancy exercises that many businesses haven’t got to grips with.”

The amount of pay used to calculate statutory redundancy pay will be increased from £350 to £380 per week, as announced in the 2009 Budget.