Budget 2009: Raised statutory redundancy pay could add to firms' costs and increase risk for younger staff

David Woods, 22 April 2009

The Government will increase statutory redundancy pay from £350 per week to £380 per week.

But, according to law firm Eversheds, the increase could bring extra cost to employers in enhancing their redundancy schemes and may mean younger staff will be at more risk of redundancy.

Martin Warren, head of employment law at Eversheds, said: "While increased payments will be of comfort to employees who find themselves out of work as the recession continues to bite, this enhancement will be unwelcome news for employers, many of whom are struggling to stay afloat in difficult circumstances.

"The impact will also be greater for some businesses that offer employees agreed enhanced redundancy payment schemes but use statutory redundancy pay as the starting point for calculating payments.

"Raising the cap on statutory redundancy pay could increase the likelihood that younger workers - who typically earn less and have fewer years of service - would be selected for redundancy because their entitlements tend to be lower. But this strategy could be counterproductive for employers and have a negative impact on the sustainability of the business in the longer term."

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