Something to ponder about, hopefully most will not have to think about this , but I believe forewarned is forearmed.
What happens when the Job Retention Scheme ends?
The Job Retention Scheme (JRS) has now been extended to October 2020. This help from the Government has been a welcome relief at a time when many businesses may have had to resort to making staff redundant .
So what happens after October when the scheme is meant to come to an end? The best outcome is that trade picks up quickly and economic activity reverts back to pre Covid19 levels. However, what if this does not happen quickly and it becomes a long hard slog to recovery?
Should you start making your employees redundant?
The problem with redundancy is it is an expensive move for the company and that of a last resort for many reasons, in particular:
– The cost of letting go your staff. Firstly redundancy payments and potential accrued holiday pay can be substantial and threaten the stability of a business in uncertain times. Furthermore, the time and money that you have spent training your staff over the years. These being costs that you will incur again when rehiring new staff in the future when business picks up again.
– Secondly is the morality issue. Is redundancy truly the best way to treat employees that have severed your organisation well over a period of time?
Are there any other options?
There are several options open to organisations before commencing redundancy consultations such as:
- Enforcing use of annual leave
- Organisations have the right to dictate the use of statutory annual leave and depending on the contract, additional annual leave
- The employer must give twice the period of notice as the period of enforced annual lay-offs or short time working
- Employees are temporarily laid off or work hours reduced i.e. a maximum of 4 consecutive weeks or six weeks in any 13-week period. Note laying off staff may be a breach of contract unless there is a specific clause in the employment contract or the employee consents (see below)
- You may avoid a redundancy situation if the period of lay-off/short time working is less than the above, so organisations do not have to budget for statutory and/or enhanced payments
- Employee can request statutory redundancy payment if lay-off/short time working lasts for longer than 4/6 weeks as applicable
- Employee may have the right to a statutory guarantee payment i.e. up to five days in any three-month period
- In respect of short time working, days can be sequenced to reduce the amount of contact between people
- Agreement that the employee will still work, but part of their salary is deferred (care will need to be taken to ensure that pay in the reference period does not fall below the National Minimum Wage)
- Unpaid leave or a sabbatical
All these options will need employee consent and agreement, and will involve an assessment of employment contracts or contractual agreements permitted by contractual terms.
What if making redundancies is your only option?
Employers should of course remember that when considering making redundancies, the usual consultation rules apply.
To address the issue of substantial redundancy payments, possible financial assistance is available from the Insolvency Services’ Redundancy Payments Service (RPS). So, if your business is likely to become insolvent as a result of making the statutory redundancy payments, the Insolvency Service’s Redundancy Payments Service (RPS) may be able to help.
Assuming that the business meets the necessary criteria, the RPS would make the statutory redundancy payments directly to the redundant employees. It is important to note that his payment would not address other contractual issues giving rights to additional, non-statutory redundancy pay. This would not be dealt with by the RPS and the company would have to find the funds to address this portion of the payment.
The RPS payments are subject to the statutory limits and any employer can apply provided they are not already subject to insolvency proceedings. However, payments in respect of arrears of pay, holiday pay, or notice pay are not able to be paid by the RPS unless the employer enters into formal insolvency proceedings.
If granted financial assistance, you will have to repay any debt as soon as practically possible. Note, the monies advanced are not a grant and they would need to be repaid by the employer. Think of it as a loan. However, it would be advanced on an interest-free basis. If you think that this may apply to your business, please do not hesitate to contact us.
Whilst this financial assistance could be available from the RPS, if this option is not viable for other reasons, it may be necessary to consider whether compromise agreements could be reached as an alternative.
In the current climate that we find ourselves in, we are speaking to many business owners who are trying to navigate through these very uncertain and unprecedented times. The above suggestions are clearly not exhaustive and some options will of course only apply to certain businesses. As always we are here to help you get to the right solution for your business.
For more information, or if you wish to discuss any of the above in more detail please give us a call. In the meantime, see our website for more resources.
The information contained in this article is for general information purposes only and does not constitute advice, Whilst we endeavour to keep the information up-to-date and correct, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability for a particular purpose. We recommend that professional advise should be taken from a suitably qualified expert before undertaking any action.