Redundancy pay increase plans could lead to more job cuts

Plans to increase redundancy pay to help workers laid off because of the recession would only result in company closures and more job losses, according to employers’ groups.

The Statutory Redundancy Payment (Amendment) Bill will reach its second reading in parliament today (Friday 13 March), proposing to increase the maximum week’s pay used to calculate statutory redundancy pay by 43%, from £350 to £500.

Business groups attacked the private members’ Bill, stating it would hinder particularly small businesses in the current climate.

Phil Orford, chief executive of the Forum of Private Business, said: “The proposal, apparently to protect workers, is misguided because it would increase unemployment by forcing many businesses to close that might have survived had statutory redundancy pay been left alone.”

Meanwhile, manufacturers’ body the EEF warned the Bill would disproportionately affect the industry as it generally offered higher rates of pay than other sectors. David Yeandle, head of employment policy, added: “This Bill seems to be at variance with the government’s policy of ‘protecting vulnerable workers, supporting good employers’.”

The Bill, brought by Lindsay Hoyle MP, is supported by the country’s major unions. Hoyle said: “Today, workers are very much facing hard times again, but state redundancy pay is so out of step with average earnings it acts as a ceiling for workers, not a floor to protect them.”

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