There is to be a one-off increase from £350 to £380 in the maximum week's pay that can be taken into account for the purposes of calculating statutory redundancy pay. The Chancellor did not say when the increase would take effect although it is likely to come into force on 1 October 2009.

The maximum possible statutory redundancy payment will increase by just £900 to £11,400 for an employee who has 20 years' service, all over the age of 41. For employers who pay only statutory redundancy pay, the additional cost of the increase in the cap will be relatively small, as there will be very few employees who are entitled to the maximum payment.

The increase will have a more substantial financial impact on employers who pay enhanced contractual redundancy payments calculated by reference to multiples of the statutory amount. Employers whose schemes are enhanced by removing the cap and paying multiples of actual pay will not be affected by the change.

For information on the other key budget measures announced by Alistair Darling, see our 2009 Budget Briefing.