Director CompleteHR Ltd
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Redundancy pay increase takes effect in April

Planning any redundancies? If so it will soon become just a little bit more expensive, explains Toni Trevett.

10th Mar 2020
Director CompleteHR Ltd
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As is common at this time of year, the Employment Rights (Increase of Limits) Order 2020 was laid before Parliament on 3 March 2020.

This means that as of 6 April 2020 the fixed limits set by various statutes will increase.

The two main changes and the most common ones an employer needs to be aware of are as follows:

  • The maximum amount of “a week’s pay” for the purpose of calculating a redundancy payment or for various awards including the basic or additional award of compensation for unfair dismissal at the employment tribunal increases from £525 to £538
  • The limit on the maximum amount of compensatory award for unfair dismissal at the employment tribunal increases from £86,444 to £88,519 or one year’s gross pay, whichever of the two is the lowest

Gov.uk has a useful redundancy calculator that will assist if you are calculating redundancy cost.

The final point to remind you of is the date that is used to calculate redundancy pay.

An employee's length of service for redundancy pay purposes should be calculated using the "relevant date" in accordance with s145 of the Employment Rights Act 1996. If the employee is dismissed with notice, then this is the date on which notice of termination expires and the employment comes to an end.

Where an employee is dismissed with a payment in lieu of notice, to calculate their length of service for the purposes of statutory redundancy pay, the employer should add on the minimum statutory notice period to the employee's service as at the date on which the employment ends. This might take the employee past an anniversary, entitling him or her to more redundancy pay.

Employees are entitled to statutory minimum notice of one week after one month’s service, two weeks after two years’ service, then an additional week for each year’s service, up to a maximum of 12 weeks’ notice.

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