30 September 2021 marks the date when the Coronavirus Job Retention Scheme (“CJRS” or “furlough scheme”) is due to be formally wound down. Whilst it has undoubtedly preserved thousands of jobs over the past 18 months, many businesses will now be looking whether they can afford to bring back all of their staff.
Staff are currently unable to be put on formal notice of redundancy whilst they are furloughed – if you wish to make someone redundant before 30 September 2021, they will need to be brought back into the business and put on full pay (or at least put on full pay without being brought back). From October onwards, staff can be put on notice of redundancy but the rules around consultation (which can be complex) will apply. In short, employees will need to be given adequate notice and the proper process must be followed.
Statutory redundancy is based on the number of years an employee has worked, together with a weekly multiplier based on their age, with the weekly amount currently capped at £544 per week. When calculating the redundancy pay, the employee’s weekly pay is the average they earned per week over the 12 weeks before the day they got their redundancy notice.
Redundancy costs can be extensive, especially where staff have been employed for a number of years and/or are over the age of forty. Notice pay must be accounted for, as must any outstanding holiday pay, and not forgetting the redundancy payment itself. It should be noted that redundancy pay should be calculated on what the employee’s pay would have been had they not been on furlough. Where a business has depleted turnover levels, this can have an adverse effect on cashflow.
If your business would become insolvent as a consequence of making statutory redundancy payments, the Insolvency Services’ Redundancy Payments Service (“RPS”) can give the company a loan to meet the costs, which then must be repaid as soon as possible and the RPS will likely make a decision on a case by case basis.
However, this might in turn cause further cash flow issues, so if you are considering making redundancies but are unable to meet the costs, you should seek advice from our Restructuring and Insolvency team as this might indicate that you need further support in order to facilitate a proper turnaround. It is worth noting that the RPS will meet the costs of redundancy (up to certain statutory limits) where a company requires a formal insolvency process, including a Company Voluntary Arrangement (“CVA”). A CVA can often assist with a restructure of a business, especially when it has suffered a setback and is looking to restructure to become more resilient going forward.
The end of the furlough scheme is almost upon us. If you have concerns about the viability of your business post-September, discussing the possibility of a restructure of your business is likely to be worthwhile. The sooner those discussions take place, the more options you will have available, so get in touch with our team for more information.