According to law firm Wedlake Bell, UK employers have spent on average £500 million per month during the past year on redundancy pay. This represents a 25% rise on the £4.5 billion paid out in redundancy settlements in the year ending March 31 2009.
Employment partner David Israel said: "At a total of £10.5 billion for two years, the cost to UK employers of credit crunch related job cuts in redundancy payments alone is staggering.
"Businesses have been willing to take a pretty big upfront hit in order to deliver longer-term savings. On average they have been paying far more than the minimum redundancy payments they have to pay by law."
He estimates redundancy settlements during 2008-2010 averaged £12,500 per individual.
The maximum amount of statutory redundancy pay you can receive is £11,400.
Mr. Israel believes there are three reasons why employers are willing to pay more than the statutory minimum:
- Higher payments maintain the morale of employees who remain and bolster the employers' reputation for looking after staff.
- Employers often have to shed staff they would prefer to keep and feel people losing their jobs 'deserve' to be paid more.
- Higher redundancy payments are often offered on the basis that the employee agrees not to pursue any legal claims, such as unfair dismissal, against the employer.
Israel adds: "Employees can be more motivated to launch a claim in an economic downturn as they have no alternative job to go to. That motivation often trumps the fact that it can be far harder for an employee who is part of a large redundancy programme to prove they have been unfairly dismissed."
** Redundancy & unfair dismissal - additional information **