Negotiated (reduced) redundancy agreement

[stuckinarut]

I'm stuck between a rock and a hard place - My (limited) business needs to get rid of two employees (only two left) to remain viable, but it cannot afford to pay any redundancy.

If my employees were offered a smaller redundancy payment than they are due under statute, is this acceptable and would it give them any problems if they come to claim any government assistance after the redundancy?

What would I need to do if they accepted the reduced offer?

 

[sjbeale]

The statutory payment of £450 per week is the maximum. If your employees earn less than £450 per week you can use that figure to calculate their redundancy payment. You have to pay the required amount of redundancy otherwise they will take you to an employment tribunal. Don't forget they will need to be paid untaken accrued holidays up to the termination date and pay in lieu of notice if you do not wish them to work out their notice. If you can not pay because you are insolvent the government insolvency fund will pay them.

 

[Newchodge]

It is acceptable if they agree to it, but why would they?

To prevent them taking a claim against you you would have to get them to sign a legally binding agreement, however as there is no benefit for them, again, why should they?

If your firm goes into liquidation, they can get all that they are owed from the government fund.

 

[kulture]

You have to pay them what is due under the law. This is a weeks pay for every year plus their notice period. If you cannot afford that, then it is questionable that the company can survive anyway.

 

[stuckinarut]

Thanks for the replies, although they don't offer any way ahead other than for me to close the company down.

I appreciate why the rules are there, as there is obviously scope for the less scrupulous to screw the government and/or employees, but it seems crazy - if I close the buisiness, I no longer contribute to the taxation pot, the government will still have to pick up the bill for the redundancies, will lose VAT and PAYE revenue and will have to support people on benefits. If they funded the redundancy payments, the costs would be reduced and they stand to gain in the long run from my comoany's profits.

Maybe the Federation for Small Business should be looking at this?

 

[ethical PR]

If you can afford to pay partial redundancy and this will mean you have a viable business going forward, could you take a personal loan and/or borrow from family and friends to meet the balance of the cost?

 

[Alan R Price]

There is a loan scheme run by the Redundancy Payments Service which is little publicised. If a business can demonstrate that it will be able to survive if it makes redundancies, thereby avoiding others from becoming unemployed the RPS may lend the money to fund the redundancies. Check out this article on our website. The phone number has changed but when I rang the old one a few weeks ago I was directed to the new number.

 

[Paul_Rosser]

A list of all the RPO's is available here

 

[Uimeas]

Look for redundancy loans, majority actually will offer you a sum that will aid your survival, but also important to consider the law, and ensure that what you are doing wont cost you short term (as well as long term)