The limit for redundancy pay is to increase at the end of the year, the Department for Business, Enterprise & Regulatory Reform has announced. The changes will take place on 1 October and will see the weekly limit used to calculate statutory redundancy pay rise from £350 to £380.

Furthermore, the government has noted that another rise will not take place until February 2011 as this one-off increase was announced by the Chancellor in the 2009 Budget. Employees are eligible for redundancy pay if they have been in a particular job for two years or more. It should be paid automatically, although if it is not given once a written request is made, an appeal can be sent to an Employment Tribunal.

The government hopes this one-off rise will help staff without creating too much of a burden to their employers. Each February, an annual uprating formula has been used by the department to increase the limit on a week's pay in line with the Retail Prices Index, which is then rounded up to the nearest £10.

Jo Davis, partner in the employment law team at B P Collins comments: "It's difficult to see how an extra £30 a year (equating to a maximum of an extra £900) will really help those facing long-term unemployment, although it will certainly hurt those employers who have to streamline their workforce to keep afloat.

"Employers would be wise to look at others ways to cut costs, such as reduced hours or sabbaticals, which ensure that their staff are poised to take advantage of the market when the economy turns the corner and don't carry with them the significant overheads that come with redundancies.

"Whatever avenue they explore, however, they should seek legal advice to ensure they don't find there is a hidden cost in terms of a legal claim that they didn't factor in when doing their costings."