Companies, Covid Support, Furlough, Insolvency, Insolvency Practitioner, Redundancy|

Dealing with employee matters and redundancies

Since March 2020, employers have had more to consider than ever before when it comes to dealing with their employees.  For many small businesses dealing with employees can be time consuming.  To help businesses decide what needs to be done in relation to their workforce, the latest changes in employment legislation, and others on the horizon, are summarised below.

The Coronavirus Job Retention (Furlough) Scheme (“CJRS”)

Since its introduction in March 2020, the Coronavirus Job Retention Scheme (CJRS) has been used by approximately two thirds of businesses.  The scheme initially allowed employers to ‘furlough’ staff whose jobs would otherwise have been at risk, and the government covered 80% of their monthly salary up to a limit of £2,500.  The scheme was extended on a number of occasions and will now end on 30 September 2021.  The deadline for submitting a claim for September is 14 October 2021.

For claims relating to August and September 2021, the government reduced its contribution to 60% of wages, up to a maximum of £1,875.  An employer must top up employees’ wages by at least 20% of wages in order to ensure that the employee themselves receives 80% of wages.  This means that the employer contribution throughout August and September 2021 was up to £625 per month, per employee subject to the scheme.

With the scheme now due to end, those businesses using the scheme may need to consider whether the business can continue without CJRS support, or whether redundancies are likely to be made. 

End of the emergency coronavirus right-to-work checks

From 30 March 2020, employers have benefited from temporary adjustments to the process of checking individual rights to work.   These changes allowed employers to check documents remotely (via video calls) and receive scanned documents rather than originals.

These measures are temporary but will now remain in place until 5 April 2022 (inclusive).  All employers should be aware that checks continue to be necessary and further information is set out in the following guide:

Employers obligations if making employees redundant

Employees who meet the qualifying criteria for redundancy under the Employment Rights Act 1996 are entitled to receive statutory redundancy payments.  You are required by law to consult with your employees about potential redundancies and must provide advanced notification to the government of any proposal to dismiss 20 or more employees.

If your company cannot afford to fund the redundancy payments, it is possible to apply to the Insolvency Service for financial assistance. If approved, the Redundancy Payments Service (RPS) will make payments direct to the employees and then seek to recover the monies advanced from your company. If your company does not reimburse the RPS, enforcement action will be taken.

If your company is insolvent, the RPS will pay claims direct to the redundant employee, up to certain limits, and will then take the employees place as a creditor in the insolvency.

So, what can be claimed?

Redundancy Pay

An employee is usually entitled to statutory redundancy pay if they have been continuously employed for two years or more.  Statutory redundancy pay is calculated as:

  • Half a week’s pay for each full year you were under 22;
  • One week’s pay for each full year you were 22 or older, but under 41;
  • One and a half week’s pay for each full year you were 41 or older.

Length of service is limited to 20 years and the maximum amount per week is £538. Your likely redundancy entitlement can be calculated here.

Payment in Lieu of Notice

You must give employees’ adequate notice before their employment ends:

  • at least one week’s notice if employed between one month and 2 years;
  • one week’s notice for each year if employed between 2 and 12 years;
  • 12 weeks’ notice if employed for 12 years or more.

All employees should receive their basic pay (which would have been paid during the notice period) and could claim additional entitlements if their contract provides for them.

Unpaid Wages and Accrued Holiday Pay

Employees are entitled to receive unpaid wages and accrued holiday pay, and other monies owed by the employer.  Arrears of wages can be claimed for a maximum of 8 weeks, at £544 per week.  Claims for holiday entitlement which has been accrued but not taken (or holidays taken but not paid) are limited to 6 weeks, capped at the same level.

There is no automatic entitlement for employees to carry-over annual leave.  If a contract of employment does not permit entitlement to be carried-over, then in line with the criteria set by the Redundancy Payments Service (RPS), employees are only permitted to carry-over increased holiday pay due to Covid-19 if there is evidence that the employer either prevented or refused leave as a result of Covid-19 measures.

Contact Insolvency Practitioners today

If you are worried your company is struggling, or will struggle when furlough ends, it is very important that you seek expert advice from a licensed insolvency practitioner. We at Keywood Group are a licensed insolvency practice with offices in Birmingham and London and can help you.

Contact us for a no obligation chat about options available.


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