As announced in April’s budget, the maximum weekly pay limit for statutory redundancy payments will increase from £350 to £380 on 1 October 2009.

Ordinarily, the rate increases each February in line with the RPI, and indeed the last increase took effect in February 2009 when it rose from £330 to £350. The reason for the forthcoming October rise is due to the current economic climate which is seeing a substantial rise in the number of redundancies. It was also felt by the Government that this increase would strike a balance between offering greater support to those employees affected, without imposing too much of a burden on employers.

Whilst this means that employers will face increased redundancy payments from October, the Government has stated that there will be no further increase in February 2010 and therefore the cap of £380 will now be in place until February 2011.

It was initially believed that this one-off increase would apply to redundancy payments only. However, following the publication of BERR’s Final Impact Assessment on the increase, it is apparent that the increase will apply to all types of compensation that is calculated by reference to weekly pay. This will include the basic award in claims of unfair dismissal, compensation for non-compliance with flexible working procedures and compensation for failure to provide an employee with a statement of employment particulars.