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

The end of Furlough – What happens next?

Since its introduction, the Coronavirus Job Retention Scheme (CJRS) has been used by approximately two thirds of UK businesses.  However, the scheme ended on 30 September 2021 and those businesses which were using the scheme may need to consider whether they can continue without CJRS support, whether the redundancies might sadly be necessary.

It is important to remember that redundancy is the dismissal of an employee because you no longer need anyone to do their job.  This might be because the business has changed the way it operates (perhaps by streamlining processes), is no longer offering certain services, or is ceasing to trade altogether.

What is the Redundancy Process?

You must follow a fair redundancy process, and this must include collectively consulting your staff if more than 20 are at risk of redundancy.

As soon as possible, you should communicate with the employees.  Ideally, you should hold a meeting with all affected employees to explain why redundancies are necessary, and outline what will happen next.  Remember, all employees in this position have the right to reasonable time off to attend interviews or training and must not be unfairly selected for redundancy.

If you are unsure of the process then you can find helpful information, here:

If your business is closing and you have instructed an Insolvency Practitioner to assist you with the process, they may attend and deal with any questions from employees. This can make the process less daunting for business owners and provide clarity for employees on their rights’.

What happens if my business cannot afford to pay for redundancies?

Employees who meet the qualifying criteria for redundancy under the Employment Rights Act 1996 are entitled to receive statutory redundancy payments.  Where a company is insolvent, the Redundancy Payments Service (RPS) will pay claims direct to the redundant employees, up to certain limits, and will then take the employees place as a creditor in the insolvency.

This means that your employees receive their statutory entitlements as quickly as possible, even if the company does not have sufficient funds to meet the cost. 

How is Redundancy Pay calculated?

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.

The maximum amount paid per week is currently £544, and length of service is capped at 20 years. 

Other Statutory Payments (Wages, Holiday Pay and Notice Pay)

Employees are entitled to receive unpaid wages and accrued holiday pay, and statutory notice pay owed by the employer.  In addition, they may also be entitled to receive monies owed in respect of a contractual bonus, overtime or commissions.

Arrears of wages are capped at 8 weeks’ per claimant, at £544 per week (before tax). Claims submitted 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 weekly amount.

In addition, an employer must give adequate notice before the employment ends, which is:

  • 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.

It is also important to note that The Employment Rights Act 1996 (Coronavirus, Calculation of a Week’s Pay) Regulations 2020, provide employees who have previously been furloughed with added protection, by requiring that the calculation of their statutory entitlements is based on their normal pay, rather than on their furloughed pay.

Can Insolvency Practitioners help?

Keywood Group is a Licenced Insolvency Practice with offices in Birmingham and London and our team has extensive experience in advising business on their options and dealing with company closure and helping directors to deal with making staff redundant.  Our Insolvency Practitioner is licenced and regulated by The Insolvency Practitioners Association, and our team provides transparent advice on all aspects of insolvency and company closure.

If you want further information, please contact us for a no obligation chat.

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