Increase in redundacy pay bad for business

Plans to increase redundancy pay to help workers laid off because of the recession would only result in company closures and more job losses, business groups have warned.

The Statutory Redundancy Payment (Amendment) Bill will reach its second reading in Parliament today (13 March), proposing to increase the maximum week's pay used to calculate statutory redundancy pay by 43%, from £350 to £500. 

The private members' Bill, brought by Lindsay Hoyle MP, is supported by the country's major unions. 

Hoyle said: “Today, workers are very much facing hard times again, but state redundancy pay is so out of step with average earnings it acts as a ceiling for workers, not a floor to protect them.”

But the Forum of Private Business (FPB) attacked the Bill, warning that it would hinder particularly small businesses in the current climate. 

Phil Orford, chief executive of the FPB said: “The proposal, apparently to protect workers, is misguided because it would increase unemployment by forcing many businesses to close that might have survived had statutory redundancy pay been left alone.”

Last month, research revealed that hospitality has been one of the worst hit sectors by the recession with jobs being cut in each of the past nine months and the number of people employed in the sector falling at its fastest rate in 12 years.

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By Daniel Thomas

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