Statutory redundancy pay set to increase from 6 April 2016

The Department for Business, Innovation and Skills has announced the annual increases for statutory redundancy pay for dismissals occurring on or after the 6th April.

Since 2014, the annual increase has taken place in April each year; previous to 2014 the increase took place in February. This years’ increase sees a 0.8% rise in redundancy pay which is lower than last years’ increase of 2.3% to 2.4%. The annual increase reflects the retail prices index rise of 0.8% from September 2014 to September 2015. 

From the 6th April 2016, the redundancy pay weekly cap will increase from £475.00 to £479.00 per week, with a maximum statutory redundancy payment increase from £14,250.00 to £14,370.00.

The maximum compensatory award for an unfair dismissal claim will also increase from £78,335.00 to £78,962.00. A tribunal can award a maximum compensation for an unfair dismissal of £93,332.00 where the maximum statutory redundancy payment is also taken into account. 

The compensatory award in an unfair dismissal is capped at the higher of £78,962.00 or one year’s gross salary. 

These rates apply for dismissals where the event giving rise to the entitlement to compensation or other payments occurred on or after the 6th April 2016; so it is important for employers to consider the new rates if they are planning on making redundancies in the next few months.

It is also advisable for employers to ensure any policy documents are updated ahead of the new rates coming into effect.