Redundancy Rights with Liquidation?
Discussion
Hi All,
I hope everyone is keeping well and as safe as they possibly can.
My mum is in a bit of a precarious position with her employer, and with this forum being helpful in the past, would like to pick the brains of some of you.
My mum is an employed hairdresser, which obviously isn't trading at the moment, meaning the business is not in a position to pay wages going forward. The normal thing would be for the employer to enroll the employee's onto the furlough scheme over this period of time. My mum has expressed her wish to be put on the furlough scheme, as she will no longer be earning any money. All fairly straight forward so far?
Her employer(Boss) has stated that she will not be enrolling my mum or the rest of her employee's onto the furlough scheme as she wishes to enter bankruptcy. The business appears to be in debt and in an insolvent position, with the last pay cheque "apparently" coming via the employers credit card. The employer wishes to not take the any financial aid from the government and believes bankruptcy would be the best option going forward.
My mum and the rest of the employee's are now in a vulnerable position and wondering where to go next. My mum and dad should be able to just about make do financially over the next 3 months, but anything after that will be very difficult. The employer has mentioned redundancy, which would benefit my mum, in that she has given the business 20 years service. However, after reading about it, in normal circumstances, this can take 12 weeks, with the length of service my mum has given. Her employer has mentioned using universal credits during this period, but would I be right in presuming that it would remove any right of redundancy? She would have to be unemployed to receive universal credit, something which she would be very against.
So does anybody have any advice in how to approach this situation? My mum and dad are not experts in this arena, and I write code on a computer! I dont trust the employer one bit, and neither does my mum and dad. She would throw anybody under a bus in order to benefit herself given the opportunity. Like I said above, my mum and dad can cope financially for 2/3 months, but anything beyond that would be a no go. What should be mum expect to receive during this period? Simply wait for the redundancy money to turn up or are there better alternatives?
I have of course looked at various Government pages and websites around similar matters to this, but sometimes some old fashioned forum advice is greatly needed and appreciated. I dont want to see my mum thrown under a bus here and need to understand what to "watch out for" regarding the employer and any dodgy tactics they may undertake.
Many Thanks in Advance.
Ben
I hope everyone is keeping well and as safe as they possibly can.
My mum is in a bit of a precarious position with her employer, and with this forum being helpful in the past, would like to pick the brains of some of you.
My mum is an employed hairdresser, which obviously isn't trading at the moment, meaning the business is not in a position to pay wages going forward. The normal thing would be for the employer to enroll the employee's onto the furlough scheme over this period of time. My mum has expressed her wish to be put on the furlough scheme, as she will no longer be earning any money. All fairly straight forward so far?
Her employer(Boss) has stated that she will not be enrolling my mum or the rest of her employee's onto the furlough scheme as she wishes to enter bankruptcy. The business appears to be in debt and in an insolvent position, with the last pay cheque "apparently" coming via the employers credit card. The employer wishes to not take the any financial aid from the government and believes bankruptcy would be the best option going forward.
My mum and the rest of the employee's are now in a vulnerable position and wondering where to go next. My mum and dad should be able to just about make do financially over the next 3 months, but anything after that will be very difficult. The employer has mentioned redundancy, which would benefit my mum, in that she has given the business 20 years service. However, after reading about it, in normal circumstances, this can take 12 weeks, with the length of service my mum has given. Her employer has mentioned using universal credits during this period, but would I be right in presuming that it would remove any right of redundancy? She would have to be unemployed to receive universal credit, something which she would be very against.
So does anybody have any advice in how to approach this situation? My mum and dad are not experts in this arena, and I write code on a computer! I dont trust the employer one bit, and neither does my mum and dad. She would throw anybody under a bus in order to benefit herself given the opportunity. Like I said above, my mum and dad can cope financially for 2/3 months, but anything beyond that would be a no go. What should be mum expect to receive during this period? Simply wait for the redundancy money to turn up or are there better alternatives?
I have of course looked at various Government pages and websites around similar matters to this, but sometimes some old fashioned forum advice is greatly needed and appreciated. I dont want to see my mum thrown under a bus here and need to understand what to "watch out for" regarding the employer and any dodgy tactics they may undertake.
Many Thanks in Advance.
Ben
If there is no cash I can see why the employer will avoid the furlough, as it is paid in arrears. While hard to hear, the employer is probably doing the right thing by calling it a day as they can be liable if they are running while insolvent. Your mum will get the statutory redundancy paid by the Government if not enough funds for employer to pay. See: https://www.gov.uk/redundancy-your-rights/redundan...
Lots of hairdressing businesses moved over to chair rental and self employed basis over last decade or so, to avoid redundancy and sick pay costs. Many folk will be in a similar position in the next month or so.
Someone else may know more on your specific queries, but good luck to your mum it's going to be tough.
Lots of hairdressing businesses moved over to chair rental and self employed basis over last decade or so, to avoid redundancy and sick pay costs. Many folk will be in a similar position in the next month or so.
Someone else may know more on your specific queries, but good luck to your mum it's going to be tough.
Edited by thepeoplespal on Sunday 5th April 12:46
If the business goes in to liquidation then the liquidator will arrange for payment of redundancy payments through HMRC at the legal minimums based on wage, age and length of service. To payments in lieu of notice are payable. Payments can take some time as HMRC will only pay if the business cannot.
Access to benefits etc. does not need to wait for the conclusion of the redundancy payments but does require notice of redundancy.
Access to benefits etc. does not need to wait for the conclusion of the redundancy payments but does require notice of redundancy.
Thanks for all your comments on here! Much appreciated.
Sounds like the owner has supposedly filed for Bankruptcy, although this is only via a text message and nothing else, so it remains to be seen! There does not seem to be a great deal of progress with this but understanding given the situation we are in!
Meanwhile my mum has not been put onto the furlough scheme, with the owner stating that she is not eligible for it? Looking on the Gov Website, it does seem as if there isn't a vast amount of eligibility required for business's to access the furlough scheme, so could it be to do with her filing for bankruptcy?
Do I smell bulls### or could this be genuine from the owner? Its all very cryptic at the moment with the communication, but currently my mum has not received a single payment for 3 months, just like thousands of other people in this country.
Be good to hear some opinions on this as something seems very fishy to me with the owners dealings.
Sounds like the owner has supposedly filed for Bankruptcy, although this is only via a text message and nothing else, so it remains to be seen! There does not seem to be a great deal of progress with this but understanding given the situation we are in!
Meanwhile my mum has not been put onto the furlough scheme, with the owner stating that she is not eligible for it? Looking on the Gov Website, it does seem as if there isn't a vast amount of eligibility required for business's to access the furlough scheme, so could it be to do with her filing for bankruptcy?
Do I smell bulls### or could this be genuine from the owner? Its all very cryptic at the moment with the communication, but currently my mum has not received a single payment for 3 months, just like thousands of other people in this country.
Be good to hear some opinions on this as something seems very fishy to me with the owners dealings.
Vorsprung Durch Technik said:
Thanks for all your comments on here! Much appreciated.
Sounds like the owner has supposedly filed for Bankruptcy, although this is only via a text message and nothing else, so it remains to be seen! There does not seem to be a great deal of progress with this but understanding given the situation we are in!
Meanwhile my mum has not been put onto the furlough scheme, with the owner stating that she is not eligible for it? Looking on the Gov Website, it does seem as if there isn't a vast amount of eligibility required for business's to access the furlough scheme, so could it be to do with her filing for bankruptcy?
Do I smell bulls### or could this be genuine from the owner? Its all very cryptic at the moment with the communication, but currently my mum has not received a single payment for 3 months, just like thousands of other people in this country.
Be good to hear some opinions on this as something seems very fishy to me with the owners dealings.
An employer is not obliged legally to furlough anyone. It's a support offered to businesses, not employees, if needed and if your Mum's boss is closing the business down, there is no need for them to furlough anyone. Universal Credit exists to help people like your Mum.Sounds like the owner has supposedly filed for Bankruptcy, although this is only via a text message and nothing else, so it remains to be seen! There does not seem to be a great deal of progress with this but understanding given the situation we are in!
Meanwhile my mum has not been put onto the furlough scheme, with the owner stating that she is not eligible for it? Looking on the Gov Website, it does seem as if there isn't a vast amount of eligibility required for business's to access the furlough scheme, so could it be to do with her filing for bankruptcy?
Do I smell bulls### or could this be genuine from the owner? Its all very cryptic at the moment with the communication, but currently my mum has not received a single payment for 3 months, just like thousands of other people in this country.
Be good to hear some opinions on this as something seems very fishy to me with the owners dealings.
In terms of the Bankruptcy, assuming the business was a Ltd company then an Administrator would need to be appointed to liquidate the assets from which any money owed to your Mum would be paid. This can take time and there's no guarantee there will be any money left anyway. Speaking from experience, I would suggest that your Mum makes peace with the fact that she will not get a penny other than from the government.
She is likely to have 'regulars' from the salon and I would suggest that she looks at setting up on her own as a mobile hairdresser. The next month or so will be a golden opportunity for such businesses and she should look to capitalise on that. If she takes Universal Credit, there will likely be grants that would help support her starting that businesses.
StevieBee said:
Vorsprung Durch Technik said:
Thanks for all your comments on here! Much appreciated.
Sounds like the owner has supposedly filed for Bankruptcy, although this is only via a text message and nothing else, so it remains to be seen! There does not seem to be a great deal of progress with this but understanding given the situation we are in!
Meanwhile my mum has not been put onto the furlough scheme, with the owner stating that she is not eligible for it? Looking on the Gov Website, it does seem as if there isn't a vast amount of eligibility required for business's to access the furlough scheme, so could it be to do with her filing for bankruptcy?
Do I smell bulls### or could this be genuine from the owner? Its all very cryptic at the moment with the communication, but currently my mum has not received a single payment for 3 months, just like thousands of other people in this country.
Be good to hear some opinions on this as something seems very fishy to me with the owners dealings.
An employer is not obliged legally to furlough anyone. It's a support offered to businesses, not employees, if needed and if your Mum's boss is closing the business down, there is no need for them to furlough anyone. Universal Credit exists to help people like your Mum.Sounds like the owner has supposedly filed for Bankruptcy, although this is only via a text message and nothing else, so it remains to be seen! There does not seem to be a great deal of progress with this but understanding given the situation we are in!
Meanwhile my mum has not been put onto the furlough scheme, with the owner stating that she is not eligible for it? Looking on the Gov Website, it does seem as if there isn't a vast amount of eligibility required for business's to access the furlough scheme, so could it be to do with her filing for bankruptcy?
Do I smell bulls### or could this be genuine from the owner? Its all very cryptic at the moment with the communication, but currently my mum has not received a single payment for 3 months, just like thousands of other people in this country.
Be good to hear some opinions on this as something seems very fishy to me with the owners dealings.
In terms of the Bankruptcy, assuming the business was a Ltd company then an Administrator would need to be appointed to liquidate the assets from which any money owed to your Mum would be paid. This can take time and there's no guarantee there will be any money left anyway. Speaking from experience, I would suggest that your Mum makes peace with the fact that she will not get a penny other than from the government.
She is likely to have 'regulars' from the salon and I would suggest that she looks at setting up on her own as a mobile hairdresser. The next month or so will be a golden opportunity for such businesses and she should look to capitalise on that. If she takes Universal Credit, there will likely be grants that would help support her starting that businesses.
The employer is either a sole trader, or a limited company. Individuals go bankrupt (with a trustee in bankruptcy). Companies cannot go bankrupt
Companies enter into liquidation (with a liquidator appointed) or administration (with an administrator appointed. Administrators tend to be appointed when the business is deemed saleable, which appears not to be the case here.
Lets assume it's a company and is entering into liquidation. The RPS (redundancy payment service) which is essentially the government/state, pays out long before it's know whether there will be a dividend to creditors. They do have preferential status as creditors in the liquidation, so yes they pay in the event the liquidation cannot, but the order of timing is that they pay out redundancy monies first and then claim off the liquidation much later, when they may get none, some or all of the money back
The RPS pay out in two chunks, based on statutory entitlement. The first is RP1, which mainly covers redundancy (1 week for every year worked, x 1.5 for every full year worked over 41 yrs old. I seem to recall it might be a little different for very young workers). It's capped at 20 years and capped at c £500 per week (I forget the exact figure). You also get any back pay and accumulated holiday or sick pay rights as part of this first tranche. It's paid out around 4 weeks after the company enters into liquidation, which in turn is typically around 2-3 weeks after the workforce are made redundant, so can take the best part of two months to receive the money. It's paid directly into the employee's bank account and the liquidators do help, but they can't process the claims with the RPS until the date of liquidation, hence the timeframe above
There is no reason you can't start applying for another job, claim benefits or do anything else you want as soon as you are made redundant - that RP1 pay out will be the same regardless as it's back pay and redundancy entitlement
There is a second claim, using the RP2 form. That's for pay in lieu of notice. You have to wait until the notice period you were entitled to work has passed - let's say it's 10 weeks. At the end of the 10 weeks, you have to declare what you have earned, either in work if you have a new job or as benefits. You will receive what you would have earned in wages in your previous job (capped at the same cap as redundancy - c £500 per week), over the 10 week period, less any money you have earned/claimed. If you earn £5k in one day or £500 per week for 10 weeks which is also £5k, it doesn't matter - it gets knocked off your payout in the same way. There are certain benefit amounts which can be knocked off by the RPS regardless of whether you claim them, as you have an obligation to mitigate your RP2 claim
The main potential problem/delay for employees right now is if there is no pressure to force the company into liquidation and if the employees haven't actually been made redundant yet, there is no process to claim money from the RPS.
Of course it could be a business which isn't a company, in which instance we have a whole other set of criteria .....that don't involve a liquidator or administrator
As for the person suggesting there are dangers in running a business knowingly insolvent, that is correct, however amongst the new rules brought in under COVID19 was a temporary suspension of wrongful trading prosecutions for directors, specifically to address trading under lockdown, in an attempt to stop directors pushing the button too soon. Most people in the industry think that's a huge mistake
Oh and whilst I work in the industry, I'm not a lawyer, so this is not legal advice as I'm not authorized to provide same
Companies enter into liquidation (with a liquidator appointed) or administration (with an administrator appointed. Administrators tend to be appointed when the business is deemed saleable, which appears not to be the case here.
Lets assume it's a company and is entering into liquidation. The RPS (redundancy payment service) which is essentially the government/state, pays out long before it's know whether there will be a dividend to creditors. They do have preferential status as creditors in the liquidation, so yes they pay in the event the liquidation cannot, but the order of timing is that they pay out redundancy monies first and then claim off the liquidation much later, when they may get none, some or all of the money back
The RPS pay out in two chunks, based on statutory entitlement. The first is RP1, which mainly covers redundancy (1 week for every year worked, x 1.5 for every full year worked over 41 yrs old. I seem to recall it might be a little different for very young workers). It's capped at 20 years and capped at c £500 per week (I forget the exact figure). You also get any back pay and accumulated holiday or sick pay rights as part of this first tranche. It's paid out around 4 weeks after the company enters into liquidation, which in turn is typically around 2-3 weeks after the workforce are made redundant, so can take the best part of two months to receive the money. It's paid directly into the employee's bank account and the liquidators do help, but they can't process the claims with the RPS until the date of liquidation, hence the timeframe above
There is no reason you can't start applying for another job, claim benefits or do anything else you want as soon as you are made redundant - that RP1 pay out will be the same regardless as it's back pay and redundancy entitlement
There is a second claim, using the RP2 form. That's for pay in lieu of notice. You have to wait until the notice period you were entitled to work has passed - let's say it's 10 weeks. At the end of the 10 weeks, you have to declare what you have earned, either in work if you have a new job or as benefits. You will receive what you would have earned in wages in your previous job (capped at the same cap as redundancy - c £500 per week), over the 10 week period, less any money you have earned/claimed. If you earn £5k in one day or £500 per week for 10 weeks which is also £5k, it doesn't matter - it gets knocked off your payout in the same way. There are certain benefit amounts which can be knocked off by the RPS regardless of whether you claim them, as you have an obligation to mitigate your RP2 claim
The main potential problem/delay for employees right now is if there is no pressure to force the company into liquidation and if the employees haven't actually been made redundant yet, there is no process to claim money from the RPS.
Of course it could be a business which isn't a company, in which instance we have a whole other set of criteria .....that don't involve a liquidator or administrator
As for the person suggesting there are dangers in running a business knowingly insolvent, that is correct, however amongst the new rules brought in under COVID19 was a temporary suspension of wrongful trading prosecutions for directors, specifically to address trading under lockdown, in an attempt to stop directors pushing the button too soon. Most people in the industry think that's a huge mistake
Oh and whilst I work in the industry, I'm not a lawyer, so this is not legal advice as I'm not authorized to provide same
Edited by jonby on Tuesday 2nd June 08:56
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