Government under pressure to raise minimum redundancy pay

The amount of money payable to redundant staff by employers could be in line for a dramatic increase after it emerged that the government is coming under increased pressure to make a big one-off rise to the current limit.

It comes as figures from the Office for National Statistics released today revealed UK unemployment had risen by 146,000 to 1.97m between October and December – a number less than predicted by some, but still a rate of 6.3% – the highest since 1998.

Last week, Lindsay Hoyle, the Labour MP for Chorley, tabled an Early Day Motion (EDM) urging the government "to address the current cap on Statutory Redundancy Pay (SRP)", which stands at £350 a week.

The EDM noted that "the statutory limits on the amount of weekly pay which counts when calculating an employee's right to SRP has not increased in line with earnings and, as a result, the limit has declined to just 56% of average weekly earnings".

Hoyle, who will table a backbench bill on the issue for debate on 13 March, said that he wanted to see the cap on SRP updated to reflect increases in average earnings over the past 40 years.

However, BPIF director of corporate affairs Andrew Brown, warned that a major increase could heap more financial woes on struggling print companies.

"The difficulty is that those companies that do pay lower rates are the ones that can least afford to pay any increased redundancy," he said.

"Having said that, for the individuals concerned of course, the redundancy is important and, if you look at the movement in SRP historically, I suspect it's probably not kept pace with the movement in earnings."

Meanwhile the Trades Union Congress (TUC) has called on the government to honour its 2005 manifesto pledge to issue a one-off raise to the weekly limit.

It wants the government to raise the weekly earnings cap to "at least £500" and the tax limit (under which redundancy pay is tax free) from £30,000 to £50,000.

The TUC has also called for the minimum qualifying period for SRP to be dropped from two years to one year.

Brown said that such a drastic raise would be more appropriate during an upturn rather than in a recession.

"For the companies who do have to make redundancies, it will make life more difficult," he said.