Redundancy and unfair dismissal get more expensive

Published: 2nd December 2008

The new figures for calculating redundancy payments and unfair dismissal awards have been published. There has been a notable further jump in the level of a week's pay used to calculate redundancy payments (and unfair dismissal basic awards), and a reasonably substantial increase in the maximum possible compensatory award which can be recovered from an unfair dismissal claim (predominantly based upon an employee's loss).

The key figures are:

• £350 will be the maximum amount of a week's pay for calculating statutory redundancy pay and the basic award (up from £330);
• £10,500 will be the maximum statutory redundancy payment or basic award (up from £9,900); and
• £66,200 will be the maximum compensatory award which can be made for unfair dismissal (up from £63,000).

These increases mean that the maximum total unfair dismissal award is now as much as £76,700. This makes it even more important than ever to follow good HR practice, carefully consider all dismissals, and ensure that the defence of claims is conducted as strongly as possible. It is also important to remember that there is no cap at all on the awards that can be made in some cases including discrimination claims and those involving whistle-blowing.

The size of the increase results from a calculation based on the retail price index as at September 2008, meaning that these awards go up significantly, at the very time when inflation is coming down. The impact this has had upon statutory redundancy pay is best illustrated by the fact that the maximum possible redundancy pay has risen to £10,500 from £6,600 as recently as at January 2000.

The increases apply to dismissals where the effective date of termination is on or after 1 February 2009. This means that it is likely to cost less to make someone redundant now than to wait, although the relevant savings are unlikely to be sufficiently significant to result in a decision to make redundancies.

If concerned about any of these issues please do take advice from your usual member of the Mace & Jones Employment and HR Team.