- Do you have employees that have been with the company a long time?
- Are you worried that the costs of making them redundant is more than the company can afford?
- Are there some employees, with long service, reluctant to retire, and just stay in the hope that you will make them redundant?
- Are any of the above making you worried that your company is going to have to close?
It is surprising how many times Company Insolvency Advice is approached by a director with one or more of the above questions:
So, what can you do and how does it work?
All employees are covered by the terms of the Employments Rights Act 1996. This Act protects all employees who work 16 hours or more each week. Those working less than 16 hours have rights but may have restrictions on some entitlements.
If your company continues to trade, then all redundancy costs must be paid by the employer.
If the company cannot afford the costs of redundancy, an option is to cease trading and go into liquidation. This means that the redundancy costs are paid by the government from the National Insurance Fund, and this is done through the Redundancy Payments Office.
This may seem as a last resort, but many companies do not have the reserves to cover these costs and are forced down a route of closure. The National Insurance Fund will pay out, directly to any qualifying employee, an amount of money based on the calculations as follows:
- Arrears of pay for a maximum of three months.
- Any untaken holiday pay due in the last 12 months (generally up to a maximum of 30 days holiday).=
- Wages in lieu of notice of one week for each full year the employee has worked, up to a maximum of 12 weeks.
- Redundancy of one week for every full year worked but increased to 1½ weeks for each year the employee is over the age of 40.
- All of these payments have a statutory maximum cap of £571 per week and this amount is updated annually.
Directors are also allowed to make claims and we can ensure that your own entitlements are maximized.
Once all employees and directors have been paid, the Redundancy Payments Office puts a claim for the amount they have distributed into the liquidation List of Creditors and will receive a dividend in due course if one is declared.
Here at the Company Insolvency Advice we are experts in insolvency and liquidation issues, why not speak to one of our advisors who will be happy to guide you through your options.