June 8th, 2020 / Insight posted in Operations

Employers severely financially affected by Coronavirus – redundancy payments service

On 23 March, the government published new guidance providing support to employers, previously only offered when their company was subject to formal insolvency proceedings. Employers can now seek financial support from the redundancy payments service (RPS) if they cannot afford redundancy payments for their employees.

How RPS works

The RPS provides support with statutory redundancy payments. No other payments associated with the termination of employees, for example holiday pay, notice pay and final salary, can be claimed through the RPS and will need to be paid by the employer.

If the business is eligible to apply to the RPS, the service will make payments directly to the employees on behalf of the company. If an employer does not pay statutory redundancy payments to eligible employees, they risk tribunal claims, higher associated costs and a time-consuming process for all.

Eligibility for the RPS

To be eligible for the RPS, an employer must provide tangible evidence that they cannot afford to pay their employees. The validity of the evidence will be reviewed by the RPS before any payment are made.

Employers who are still trading, have stopped trading or will stop trading soon are able to apply for the scheme. Those who are subject to formal insolvency proceedings are not eligible for the scheme.

If an insolvent employer does claim through the scheme, the RPS will look to recover any payment made and may use enforcement action where necessary.

Employers will also need to prove that their employees are eligible for payment. Under the Employment Rights Act 1996, employees who have continuous service for a minimum of two years are entitled to a statutory redundancy payment.

The statutory redundancy payment for each employee is based on age and length of service and the RPS payments adhere to statutory limits. Access the statutory redundancy payment calculator here.

How to apply to the RPS

If you think you your business is eligible and you require support, email RPS.FA@insolvency.gov.uk including your name, whether you are the employer, main point of contact, business name, business address and the number of proposed redundancies.

Further details regarding the RPS can be found here.