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Help for Businesses struggling to pay Statutory Redundancy payments

It has long been the case that a business could not make a claim for assistance with statutory redundancy payments until and unless they had entered into a formal insolvency process.  Where a business was insolvent, most commonly when it entered into either voluntary or compulsory liquidation, employees who had not yet received payments to which they were entitled by statute (redundancy pay, notice pay and holiday) were entitled to submit a claim to the Redundancy Payments Service (RPS).

However, a little bit of digging has turned up a change in the rules which now provide for financial support to businesses struggling to pay statutory redundancy payments to their workforce and who are not formally insolvent.

This includes businesses that:

  • are still trading,
  • have stopped trading but have not gone formally insolvent, or
  • will soon stop trading, but are not going formally insolvent.

For further information please see the attached link:  https://www.gov.uk/government/publications/financial-assistance-for-employers-unable-to-pay-statutory-redundancy-payments/financial-assistance-for-employers-unable-to-pay-statutory-redundancy-payments

If approved, the RPS will make statutory redundancy payments directly to the redundant employees on the employer’s behalf.

What the RPS can pay

RPS payments are subject to statutory limits, as detailed in Lexleyton’s Employment Key Figures 2020 Guide. The RPS cannot make any other types of payment such as arrears of pay, holiday pay, or notice pay unless the employer enters into a formal insolvency proceedings.

Eligibility Criteria

To be eligible for financial assistance from the RPS, an employer must provide evidence that they cannot afford to pay their employees statutory redundancy pay.

The RPS must also be satisfied that the former employees are eligible for statutory redundancy pay.

How do businesses apply?

If you think your business qualifies for assistance, you should email the RPS via: RPS.FA@insolvency.gov.uk

Repayment

If the RPS makes statutory redundancy payments on behalf of a solvent employer, the RPS will then look to recover the cost of the payments from the employer. If the employer fails to repay debt, enforcement action may be taken.

If your business needs help around this issue contact us to discuss employer eligibility, benefits available and commercial considerations.  Please don’t hesitate to contact us for a free initial consultation.

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