Redundancy Increase 1st October 2009

Redundancy pay limit to rise to £380 from £350 on 1 October 2009.

The Government has confirmed that the weekly limit used to calculate statutory redundancy pay will increase to £380 on 1 October 2009. At present, it is £350 per week. It has also stated that the limit will not rise again in February 2010, as it would usually do, instead it will remain at £380 until February 2011.

The payment due to each employee under the statutory redundancy payment scheme is based on:

• the employee’s age
• the employee’s amount of continuous service, subject to the minimum of two years and a maximum of 20 years
• the employee’s weekly gross pay - up to a limit of £380 (as of October 2009)

note that in 2020 it is now £538 per week!

The context behind redundancy payments is as follows:

Given certain conditions a person is entitled to a redundancy payment. The conditions are as follows:

a) That the person was an employee;

b) That he or she had been continuously employed for the requisite period;

c) That he or she was dismissed; and

d) That the dismissal was by reason of redundancy.

A person may be dismissed by reason of redundancy but that dismissal may be unfair. If unfair, the employee may become entitled to compensation for unfair dismissal if successful in a tribunal.

An individual is only entitled to a redundancy payment if he or she has 2 years’ service or more. That individual can, however, claim unfair dismissal if he or she has more than 1 year’s service.

The definition of redundancy is as follows:- (s139(1)

For the purposes of this Act (the 1996 Employment Rights Act) an employee who is dismissed shall be taken to have been dismissed by reason of redundancy if the dismissal is attributable wholly or mainly to-

a) the fact that his employer has ceased, or intends to cease, to carry on the business for the purposes of which the employee was employed by him, or has ceased or intends to cease, to carry on that business in the place where the employee was so employed, or

b) the fact that the requirements of that business for employees to carry out work of a particular kind, or for employees to carry out work of a particular kind in the place where he was so employed, have ceased or diminished or are expected to cease or diminish.

When the conditions of the above section are satisfied one generally talks about a ‘redundancy situation’. In a redundancy situation one then has to go on to consider whether it is fair to dismiss the individual. It is important to remember that an employee is not made redundant - a job is redundant and an employee is dismissed by reason of that redundancy. It is also important to remember that just because a redundancy payment is paid does not mean the dismissal is fair.