Closing your business – redundancy and furlough

Closing your business – redundancy and furlough

The Coronavirus Job Retention Scheme (aka furlough) is a helpful government offering but what happens if you think your organisation is unlikely to be resurrected once lockdown is lifted?

Most organisations have break clauses in the rental agreements for their shops or offices, some as long as six months.  So, some worried people are already thinking about serving notice on their landlords and with that comes the requirement to make their staff redundant.

Can you initiate redundancy whilst staff are furloughed?  At the time of writing, the Furlough Regulations do not state that you cannot initiate redundancy whilst an employee is being furloughed.

The statutory procedures for making staff redundant are:-

  • You need to inform your staff that they are at risk of redundancy.
  • You need to ‘consult’ with individual members of staff with the aim of mitigating the redundancy, this requires a meeting (virtual or otherwise).   Clearly if you are closing your business mitigation is not possible but that does not over ride the requirement to have a consultation meeting.
  • You need to serve a dismissal notice.  Redundancy is dismissal by another name.

What are staff entitled to receive?

  • A minimum of one weeks notice for each completed year of service up to a maximum of 12 weeks, unless their Statement of Terms & Conditions provide for a greater period.
  • Notice pay is subject to tax and NI in the usual way.
  • Payment for annual leave accrued but untaken at the date of dismissal.
  • Redundancy pay which is based on age and length of service.  There is a useful calculator at https://www.gov.uk/calculate-your-redundancy-pay.  Redundancy pay is free of tax up to a maximum of £30,000.

The question arises as to what you should pay during the notice period.  Currently legal opinion is that you should pay 100% of salary during the notice period.  That opinion is based on current legislation and case law.

If furlough is in place you will be able to get 80% reimbursement of salary (not redundancy pay) during the notice period.

Need help?  You can contact me on 07766 167160 or through my website www.bdroper-hr.co.uk

 

 

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