The Government has confirmed that the increase in the maximum level of statutory redundancy pay announced in the budget, will take effect on 1 October 2009. In a separate development, the Department for Business, Enterprise and Regulatory Reform (BERR) is to merge with the Department for Innovation, Universities and Skills to create a new Department for Business, Innovation and Skills.
The one off increase takes the weekly limit used to calculate Statutory Redundancy Pay (SRP) from £350 to £380. The increase will also apply to compensation payments (such as the basic award for unfair dismissal) which are calculated by reference to the weekly limit for SRP.
However, there is some relief for employers faced with this increase, as the Government has also announced that the annual increase in SRP which usually takes place in February, will be suspended for February 2010. Therefore the weekly limit will remain at £380 until February 2011.
The statutory redundancy payment scheme was introduced in 1965 to provide a 'safety net' for those employees who are made redundant. Since 1999 the Government has applied an annual uprating formula each February to raise the limit on a week's pay used to calculate SRP and other compensation payments in line with the Retail Prices Index.
However in the budget the Government announced it would introduce a 'one off' increase in SRP (see Howes Percival Newsflash 23 April 2009) to provide further support to the growing numbers of employees being made redundant.
The Government following "informal discussions" with the Confederation of British Industry (CBI), the Engineering Employers Federation (EEF) and the Trades Union Congress (TUC) decided against both a 'do nothing' approach of retaining the weekly limit of £350 and an increase to average weekly earnings of £450 (as currently advocated in a private member's Bill). Instead it claims that the £30 increase to £380 "strikes the right balance" between assisting employees made redundant and not placing undue burdens on employers.
The Government has indicated that it intends to "evaluate" the increase in the summer of 2011 taking into account the volume of redundancies, level of insolvencies and payments made by the Exchequer.
In a separate move the Government has also announced that the BERR, formed just two years ago from the merger between the Department of Trade and Industry and the Better Regulation Executive, is itself to be merged with the Department for Innovation, Universities and Skills. This will create a new department – the Department for Business, Innovation and Skills – to be known as 'BIS'.
The Government claims that this department will "build Britain's capabilities to compete in the global economy". The current BERR website ( www.berr.gov.uk) automatically takes you to the new BIS website.