SRP to be reviewed

6 02 2009

Just as I was sitting down wondering what to write about this week The Independent, with superb timing,  published a  headline entitled “Redundant Workers to get bigger pay offs” .  The report says that the Government has ordered a review of the payments made to workers on redundancy, known as statutory redundancy pay (SRP).  This is currently fixed at £350 per week for workers aged between 22 and 41 and is deemed to be a full week’s pay.  Workers over 41 when made redundant receive 1.5 times that figure.  That weekly figure is then multiplied by the number of complete years’ service (up to a maximum of 20) that the employee has with that company.  The employer pays the SRP to the employee, plus whatever notice monies they are due, unless the company has become insolvent in which case the state pays.

The figures are not generous and few employees will be adequately compensated by them, which makes the Government’s review welcome.  According to the report in The Independent 46% of the workforce earns more than £350 per week.  It increases by the rate of inflation every February (and only went up to £350 from £330 per week this week) and has not been reviewed for years. Apparently, when the scheme was launched in 1965 the weekly figure represented an astonishing 203% of the then average weekly earnings.  Now the figure is 56% of weekly earnings, because the figure is linked to inflation and not earnings (which is what the TUC wants to see happen).      For many people in the City they are not likely to be affected by this because their employers will usually (but are not obliged to) offer enhanced terms, such as two full weeks’ pay (increasingly common) or one month’s full pay per year of service.

Whilst reviewing this issue the government should also consider increasing the tax free sum that can be paid to redundant employees.  At the moment it is capped at £30,000 and has been at that level since 1988.  The TUC is calling for an increase to £50,000. 

That would be a very useful step but because the government will probably perceive it as being a measure that would benefit the better off I cannot see it happening soon and it will also reduce the tax-take even further.  The increase in SRP is more likely to happen because employers, not the state, pay. Smaller employers, already under severe pressure, will be squeezed further.

For the full article go to www.independent.co.uk

This article will appear in the “Docklands” and “Peninsula” newspapers week commencing 9th February 2009.

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