Tax & Accounting News

Increase in Statutory Redundancy Pay

07/10/2009

The weekly maximum pay which can be taken into account when calculating statutory redundancy pay increased from £350 to £380 on 1 October 2009.

All employees who have at least two years’ continuous service qualify for a redundancy payment and have the right to receive a written statement setting out the payment amount and how it was calculated.

The entitlement is as follows:

• for each complete year of service until the age of 21 - half a week’s pay
• for each complete year of service between the ages of 22 and 40 inclusive - one week’s pay
• for each complete year of service at the age of 41 or over - one and a half weeks’ pay.

A week’s pay is that to which the employee is entitled under his or her terms of contract at the date the employer gives notice of redundancy. The maximum service to be taken into account in calculating redundancy is 20 years. This means that the maximum statutory payment cannot exceed 30 weeks’ pay, or £11,400.

This increase will also apply to a wide range of employment tribunal awards, which are calculated using a week's pay, such as:

• basic and additional awards for unfair dismissal
• compensation for non-compliance with flexible working procedures
• compensation where an employer has failed to consult a trade union or elected employee representatives when it intends to make 20 or more redundancies
• compensation for failure by an employer to allow an employee to be accompanied to a disciplinary or grievance hearing
• compensation for failure by an employer to give a statement of employment particulars
• compensation for failure by an employer to notify an employee of either the date on which it intends to retire them or their right to make a request not to retire on that date

This figure is also used to calculate various payments made by the Secretary of State from the National Insurance Fund if an employer's business becomes insolvent, including:

• holiday pay 
• arrears of pay 
• redundancy pay
• pay in lieu of notice
• unpaid compensation for unfair dismissal

The maximum week’s pay figure is generally reviewed annually; however the £380 limit will continue until 1 February 2011. Employers may, of course, pay in excess of the statutory minimum.

For more information or advice please contact us.

 

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