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Redundancy pay (and other statutory limits) to rise again

Statutory redundancy pay will rise from April 2017. There will also be an increase in the statutory rates and limits which apply to other employment…

It has been confirmed that statutory redundancy pay will rise from April 2017. There will also be an increase in the statutory rates and limits which apply to other employment rights, such as the basic award for unfair dismissal and the maximum unfair dismissal compensatory award.

The new limits will apply to dismissals where the effective date of termination is on or after 6 April 2017. Where the dismissal falls before this date, the old rates will apply. 

The detail 

  • £489 will be the maximum amount of a week’s pay for calculating statutory redundancy pay, and the basic award for unfair dismissal (up from £479);
  • £14,670 will be the largest possible statutory redundancy payment or basic award (up from £14,370);
  • £80,541 will be the maximum compensatory award which can be made after a successful “ordinary” unfair dismissal claim (up from £78,962); and
  • £95,211 is the maximum potential award for unfair dismissal when the basic and compensatory awards are combined (up from £93,332).
  • Guarantee pay will now be £27 per day (up from £26). 

Remember that there is also an additional cap of one year’s gross salary on the compensatory award for unfair dismissal, if it is lower than the maximum compensatory award figure. 

However, there is no cap to the awards that can be made in many cases, including those for discrimination on the grounds of a protected characteristic, or those where whistleblowing is alleged to be the reason for the dismissal or detrimental treatment. 

What does this mean for me? 

The most important thing is to remember to use these new figures if you are proposing redundancies where the employment is due to end on or after 6 April 2017. These revised figures will also need to be included in any calculations being made of the costs of future redundancies.                       

Comment 

These changes occur automatically each year to ensure that employment awards increase in line with inflation. The most significant change this year is the jump of £10.00 in the maximum amount of a week’s pay for calculating statutory redundancy pay and the basic award for unfair dismissal. To put this in context, the increase last year was only £4.00. This increase may result in notable additional cost if you are undertaking a large scale redundancy exercise. 

If this alert raises any issues for your organisation please speak to your usual contact in the Weightmans employment pensions and immigration team, or contact Phil Allen (phil.allen@weightmans.com).