freelancers

Plans to increase redundancy pay may risk the survival of many small firms during the recession, business groups have warned.

The Forum of Private Business (FPB) claims the Statutory Redundancy Payment (Amendment) Bill, which had its second reading in the Commons last week, could force more small businesses to close as they struggle to cope in the economic downturn.

The Bill proposes increasing the maximum week’s pay used for calculating statutory redundancy pay from £350 to £500.

‘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,’ said the FPB's Chief Executive, Phil Orford.

‘Inevitably, this would also increase the burden of social security on the taxpayer and become a downward spiral of further unemployment and economic deterioration.’

The British Chambers of Commerce (BCC) has also voiced concerns over the plans. The organisation is now urging the Government to seek alternative ways of assisting employers in difficult times.

‘Instead of threatening firms with extra financial burdens, politicians should be concentrating on helping employers retain their staff,’ said David Frost, Director General of the BCC.

‘Reducing regulatory burdens, reintroducing the Temporary Short Time Working Compensation Scheme and freezing the national minimum wage will all help hard-pressed companies.’