Closing business - making staff redundant

[audi321]

Hi all. Looking for some advice on something.

I own a small retail shop and I have 1 member of staff. Business has been extremely poor and I've decided to close at the earliest opportunity as I simply cannot afford to prop it up from my other personal income any longer.

The member of staff has worked for me for 10 years and for the previous guy for a couple more (I think). However, I feel she used to be paid cash in hand, so whether there was ever a contract is debatable (I've asked for evidence but nothing is forthcoming - am I right in insisting on evidence or should I take her word for it?).

So my main question is, if I close tomorrow (for example) can I just give her a letter with the calculations on tomorrow? Or do I have to have a 'consultation' meeting and then more and more meetings to discuss it with her? There's nothing really to consult and I don't want to drag it out much longer as every day is costing me more money.

I'm a sole trader, not limited company unfortunately. Thanks in advance for any assistance.

[HBelder]

I think that you’d have to give your employee a week’s notice, or more if her contract stipulates a longer notice period.

Consultation periods only apply if you have 20 or more employees I believe.

[audi321]

Yes she will be getting 10 weeks notice (maybe more if she can provide evidence as above).

So what you’re saying is I don’t need to worry about consultations as it’s just one member of staff.

It’s just all the template letters I can find online reference consultation meetings etc.

[rallye101]

She's PAYE? Can claim via hmrc if so when you liquidate

[TriumphStag3.0V8]

This happened to my brother (working for a Ltd company) turned up one morning to locked doors and a note on the door basically "sorry, gone bust. Tough"

He had to claim via HMRC, which was very quick IIRC

[audi321]

As said. I’m a sole trader not limited unfortunately.

[StevieBee]

audi321 said:

So what you’re saying is I don’t need to worry about consultations as it’s just one member of staff.

That is correct.

Even if you were required to, the only topic of the consultation in your case would be to convey the reason for the redundancy which you have no doubt done (or will do) anyway.

[Eric Mc]

How does the OP not know whether a member of his staff was paid properly under the PAYE system?

Also, was this member of staff properly engaged as an employee under an employment contract.

[Rough101]

The contract you gave the staff member should reflect any carried over service, if it doesn’t, just wind back redundancy to that date.

[Douglas Quaid]

Why don’t you see if she wants to buy it. If she owns it she might turn it round.

[audi321]

The redundancy and notice pay is going to cost me personally around £4K which I am ok with as I have some stock to sell on eBay etc to get that back.

Well if there’s no consultancy period, I’m going to do it today. Never a nice thing to do but hey ho wish me luck. Rent expires end of Jan so gives me 2 weeks to empty the place and get things sorted.

[super7]

Just out of interest, can the business afford to pay redundancy? If you're propping it up with your own money then that implies it can't??

I'm not an accountant, but surely even as a sole-trader, there is a difference between your money and the business's money and if you were to remove your cash, propping it up, from the equation then the business is insolvent? How are you expected to pay redundancy?

Would be interested in what Eric has to say about it?

[Puzzles]

super7 said:

Just out of interest, can the business afford to pay redundancy? If you're propping it up with your own money then that implies it can't??

I'm not an accountant, but surely even as a sole-trader, there is a difference between your money and the business's money and if you were to remove your cash, propping it up, from the equation then the business is insolvent? How are you expected to pay redundancy?

Would be interested in what Eric has to say about it?

Employment law isn’t by thing, but as a sole trader the default would be that he is personally liable.

[Simon_GH]

If it’s a small community or you know the person well then I’d be more included to take their word. Otherwise, if an individual takes the benefits of cash in hand then they must realise it doesn’t constitute formal employment unless declared.

[Countdown]

super7 said:

Just out of interest, can the business afford to pay redundancy? If you're propping it up with your own money then that implies it can't??

I'm not an accountant, but surely even as a sole-trader, there is a difference between your money and the business's money and if you were to remove your cash, propping it up, from the equation then the business is insolvent? How are you expected to pay redundancy?

Would be interested in what Eric has to say about it?

There isn't really....as a sole trader there's no separate entity. All income is YOUR income, All expenditure is YOUR expenditure. If your business gets sued for £10 gazillion then they are coming after you personally.

[audi321]

I know I'm liable for the redundancy, not being limited was the worst decision ever (10 years ago) but hey ho - I guess the 10 x annual accounts (say £500 a year) saved is offsetting the £4k redundancy/notice pay somewhat (man maths lol). I just didn't feel it was worth it for such a small retail shop.

I'm not going to take her word for it (the previous employment) as I have a feeling she didn't have a formal contract (she said years ago that she just got a brown envelope on a Friday), so I bet it was just cash in hand on an informal basis. I've said in the redundancy letter that if she can provide me with evidence then I will rework things - I'm worried that she gets in touch with the previous owner (I know they're still friends) and he knocks something up.

Anyways, I've told her I'm going in at 3pm and I'm not looking forward to it.

[Eric Mc]

super7 said:

Just out of interest, can the business afford to pay redundancy? If you're propping it up with your own money then that implies it can't??

I'm not an accountant, but surely even as a sole-trader, there is a difference between your money and the business's money and if you were to remove your cash, propping it up, from the equation then the business is insolvent? How are you expected to pay redundancy?

Would be interested in what Eric has to say about it?

One of the issues with running a business as a sole trader is that there is no distinction between the proprietor's personal assets and liabilities and the assets and liabilities attached to any sole trader business he/she might be running.

Therefore, if the "business" owes something to somebody, so does the individual who owns the business.

That's the reason why limited companies were created as it does (in most cases) provide that separation.

[super7]

Eric Mc said:

super7 said:

Just out of interest, can the business afford to pay redundancy? If you're propping it up with your own money then that implies it can't??

I'm not an accountant, but surely even as a sole-trader, there is a difference between your money and the business's money and if you were to remove your cash, propping it up, from the equation then the business is insolvent? How are you expected to pay redundancy?

Would be interested in what Eric has to say about it?

One of the issues with running a business as a sole trader is that there is no distinction between the proprietor's personal assets and liabilities and the assets and liabilities attached to any sole trader business he/she might be running.

Therefore, if the "business" owes something to somebody, so does the individual who owns the business.

That's the reason why limited companies were created as it does (in most cases) provide that separation.

Fair enough...... learn something new everyday!!

That's scary then running a business as a sole trader and having staff. That member of staff could do something to get you sued and then your assets are on the line with no protection!

Doesn't the title Sole Trader preclude you having staff though, as then you're not a 'Sole' trader?

[Ham_and_Jam]

super7 said:

Fair enough...... learn something new everyday!!

That's scary then running a business as a sole trader and having staff. That member of staff could do something to get you sued and then your assets are on the line with no protection!

Insurance is available to protect you against this.

[ATG]

audi321 said:

I know I'm liable for the redundancy, not being limited was the worst decision ever (10 years ago) but hey ho - I guess the 10 x annual accounts (say £500 a year) saved is offsetting the £4k redundancy/notice pay somewhat (man maths lol). I just didn't feel it was worth it for such a small retail shop.

I'm not going to take her word for it (the previous employment) as I have a feeling she didn't have a formal contract (she said years ago that she just got a brown envelope on a Friday), so I bet it was just cash in hand on an informal basis. I've said in the redundancy letter that if she can provide me with evidence then I will rework things - I'm worried that she gets in touch with the previous owner (I know they're still friends) and he knocks something up.

Anyways, I've told her I'm going in at 3pm and I'm not looking forward to it.

Your objective should be to treat her fairly, not to try to minimise your costs, but if I were going to attempt the latter, I'd completely ignore her period of employment under the previous owner. I wouldn't mention it in the letter at all and I'd calculate redundancy payments based on the 10 years. With luck she'll accept this and there's no further negotiation or dispute. If she does bring up her employment under the previous owner, then you need to negotiate. If she can't produce good evidence of employment you might "joke" that she already benefitted from paying little tax during that period and then suggest you pay 50% of the additional redundancy payment that would have accrued during that period.