Have you budgeted for statutory redundancy pay increases from April 2017?

How is your HR strategy looking for the next financial year? All in good shape? Got all your new minimum wage levels in place in your staffing budget and payroll? Yes, then well done! How about the new maximum redundancy rates coming into force April 2017? Ooooo, did we get you there? Never fear, HR180 is here! Our HR Manager and payroll guru, Tim Frear, tells us more about what to expect and why you should be taking notice right now!

by Tim Frear

With April fast approaching, it’s time to remember some of the increases in government rates. We are all made aware from radio and TV adverts that minimum wages are increasing to £7.50 for over 25 year olds, £7.05 for those employees between 21 to 24, £5.60 for 18 to 20 year olds with under 18’s getting just a 5p increase to £4.05. There is a slight change in the apprentice rates increasing from £3.40 to £3.50 per hour.

However, each year HR professionals working on redundancy and restructures completely forget to update their costings associated with making these redundancies, affecting their budgets and the figures we provide to our shareholders and employees. For any redundancies on or after 6 April 2017 the redundancy cap on weekly wages is to increase by £10 from £479 per week to £489 per week.

The maximum statutory redundancy payments will therefore change from £14,370 to £14,670. If you have followed fair consultation practices and have provided your employees with a redundancy schedule detailing their redundancy packages you will need to resend with the new rates.

The standard redundancy rules are not changing – an employee will still need 2 years’ service and will get one week’s pay for each full year they worked when they were 22 years old or older but under 41 years old, and one and a half week’s pay for each full year they worked when 41 years old or older. Your length of service is still capped at 20 years.

The maximum compensatory award for unfair dismissal is also increasing to £80,541 from the current £78,962. The rise in the unfair dismissal award applies where the effective date of termination is on or after 6 April 2017.

All new rates can be found in the Employment Rights (Increase of Limits) Order 2017.