Why Redundancy just got more expensive

April 4, 2023

By Fflur Jones

From 6th April 2023, the cost of making employees redundant will increase significantly. With this in mind, employers need to plan carefully when looking to make redundancies over the coming months. We share our top tips.

From 6th April 2023, the cap on a week’s pay when calculating an employee’s statutory redundancy pay will jump from £571 to £643. This hike, driven by inflation, will also mean that, for those employees with long service, the maximum statutory redundancy payment will rise from £17,130 to £19,290.

For employers currently going through redundancy consultation periods with their staff (or for those anticipating making redundancies in the near future), these increases could, in some cases, add close to 13% to the cost of making redundancies. Given that one of the most common reasons for making redundancies is as part of a cost-cutting exercise, such increases will certainly give employers something to think about.

Our tips for approaching these increases are as follows:

– Planning redundancies just got more important. At the very start of a process, map out where you want to get to at the end and work back from there.

– Don’t delay. If you need to make redundancies, delaying will only add to the cost (because redundancy payments also increase the longer an employee has been employed).

– Calculate your likely maximum liability for redundancy payments – ideally in spreadsheet form.

– Don’t forget that, when making redundancies, employees are also entitled to their notice and accrued holiday. Making employees work their notice periods and making them take their accrued holiday during their notice periods can help reduce the financial cost at the end for an employer.

– Ask for advice. Getting things right is important. From 6th April, for the first time, an Employment Tribunal can now award over £100,000 as compensation in unfair dismissal claims. As such, following a good process and dismissing fairly for redundancy has never been as important.

Increases in the National Minimum Wage and the National Living Wage

From April 2023, new hourly rates for National Minimum Wage and National Living Wage will take effect. The new rates will be:

• Apprentices – an increase to £5.28 from £4.81;

• Ages 16-17 – an increase to £5.28 from £4.81;

• Ages 18-20 – an increase to £7.49 from £6.83;

• Ages 21-22 – an increase to £10.18 from £9.18;

• National Living Wage (ages 23+) – an increase to £10.42 from £9.50.

Statutory Sick Pay (SSP), Statutory Maternity Pay (SMP) and other statutory payments

Statutory payments for time off work will also increase in April 2023. This will mean:

• Weekly payment for maternity, paternity, shared parental, adoption and parental bereavement pay will increase to £172.48 from £156.66;

• Weekly payment for statutory sick pay will increase to £109.40 from £99.35.

If you need any further help or advice, please contact Fflur Jones on fjones@darwingray.com or 02920 829 117 for a free initial chat to see how we can help you.

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