Redundancy in Charity sector ??
Discussion
I am Trustee and Treasurer of a small local Charity, with finances hovering precariously....we try to fix underlying issues, but...
We hold Reserves blocked at a level necessary to enable closure (shut down costs, redundancy payments to those employees, etc).
However, question: this is a registered Charity, but under what circumstances would Redundancy Payments NOT be payable ?
Not wishing to pursue this choice, but, if we tried to keep going and recover over a longer timeframe....by not breaching the threshold whereby Reserves are depleted excluding the minimum defined for redundancy etc.
Can I avoid Redundancy Payments....?
Thanks.
You can't. They're a statutory requirement.
If you make somebody redundant they become a creditor. If you don't pay them they take you to Court which may result in a Court order /Administration / CVA / Insolvency.
If yu made people redundant during CVA The Guv.mint pays them the stat redundancy and the claims the costs back off you.
If you make somebody redundant they become a creditor. If you don't pay them they take you to Court which may result in a Court order /Administration / CVA / Insolvency.
If yu made people redundant during CVA The Guv.mint pays them the stat redundancy and the claims the costs back off you.
The problem I face, wearing Treasurer/Trustee hat, is that the blocked Reserves of £xx are held to pay Redundancy payments and so once we get down to that level £xx, we must lock up shop and commence closure procedures.....failing then to deliver to the community the services we are here to provide.
So, I was just curious, if there was a way to avoid, technically, the Redundancy payments....and keep the Charity running and try to turn it around.
- Could employees write requesting not to be included for Redundancy ?
- Is financial collapse a justification for non-payment ?
Big Ant
What do you mean by "blocked reserves"? And why must you shut up shop if your reserves fall to a certain level?
it may be desirable to hold a certain amount of reserves to cover costs if you fail but that doesn't usually mean that you have to wind up if reserves fall below that level.
it may be desirable to hold a certain amount of reserves to cover costs if you fail but that doesn't usually mean that you have to wind up if reserves fall below that level.
OK, so we have Reserves Policy with a defined £xx being the sum that we as a Board agree is needed to settle Redundancy, and close down operations. So, as we get closer to that level of Cash, and the forecast P&L indicates a month when we're likely to breach that threshold.....we're surely obligated to trigger Redundancy notices procedure, etc.....unless of corse, there's some dirty great Grant inbound, which there isn't.
I appreciate input, hence Sunday, seeking thoughts from PH.
We have declining revenues and broadly fixed expenses, so it's fairly easy to forecast months ahead of us, and therefore anticipate when we cross the 'red line'.
I'm really after advice and thoughts, as to what 'flexibility or options' I have here.
BA
I appreciate input, hence Sunday, seeking thoughts from PH.
We have declining revenues and broadly fixed expenses, so it's fairly easy to forecast months ahead of us, and therefore anticipate when we cross the 'red line'.
I'm really after advice and thoughts, as to what 'flexibility or options' I have here.
BA
Revenues 100, Salaries for paid staff 86, with group of eager Volunteers delivering much of the 'service'.....and costs of operations are as lean as possible, and even then no contingency or slack, I've checked. We're basically loss making, but had some Reserves accrued from the past, but these are depleted.
So, current 2017/18 Budget is for a £ loss.....and that gets us just a toe-nail above the Reserves Policy threshold of 'savings'. However, after 4 months into 2017/18....we're performing worse than Budget.
So, current 2017/18 Budget is for a £ loss.....and that gets us just a toe-nail above the Reserves Policy threshold of 'savings'. However, after 4 months into 2017/18....we're performing worse than Budget.
If you can't trade through it and return to surplus then I guess you must, at some point, take the decision to close down operations. Doing so whilst able to meet your financial obligations is preferable to waiting until you're forced into closure and leaving a legacy of unpaid suppliers and staff.
But it's not an easy decision.
But it's not an easy decision.
this is why charities need to be controlled.... you are talking about messing with people that work with you, people that have probably worked hard and you are even thinking about making a decision that would deprive them of whats rightfully theres... it is not yours to make that decision. if you cant maintain that threshold then you need to wind it up and do the right thing by your workers. charity or not. making widgets or chariteeeeeeeeeeeeeeeee work it is no different. people have lives to pay bills and keep afloat until they can find another job. you do the right thing for them.
pity those that work for you I really do,
pity those that work for you I really do,
RuggedScoty, I simply try to check options, please don't pre judge me. Charity sector is truly....disappointing. My 1st venture, and the hypocrisy, double standards...wow.
Anyway, I try to recover the situation - my main focus - but checking what are choices that we may be faced with or other Trustees may present to me.
Ho hum.
Anyway, I try to recover the situation - my main focus - but checking what are choices that we may be faced with or other Trustees may present to me.
Ho hum.
Im sorry it sounds harsh- Im not judging anyone but making comment on what you wrote, you indications were to see if you could go below the level that you need to keep to pay off the employees. That alone makes me question this, if its not working if its unable to financially survive bumbling on and digging into that reserve is only going to make things worse
Take advice but not from a car forum, you really really need to err on the side of caution here and ensure that you look after your employees. that limit is there for a reason. very bad practice to eat into that and put at risk the money that the employees are entitled to. Your not entitled to make those decisions. id bet you if you went into the office and put your plan on the table and asked everyone you would get your query answered.
things are tough all round.
Take advice but not from a car forum, you really really need to err on the side of caution here and ensure that you look after your employees. that limit is there for a reason. very bad practice to eat into that and put at risk the money that the employees are entitled to. Your not entitled to make those decisions. id bet you if you went into the office and put your plan on the table and asked everyone you would get your query answered.
things are tough all round.
Generally speaking as trustees you are entitled to set and change your reserves policy.
Whether it's wise to do so in this scenario is a completely different question. It sounds like this is a permanent issue and you're only likely to prolong the inevitable so at face value probably not. Redundancy pay is a statutory requirement should not be considered as something that can be avoided.
However, if there is a prudent way which allows you to reverse the funding/cost trend whilst protecting your employees and beneficiaries then it may be workable. It might be worth considering what the rest of the balance sheet looks like, and what would happen to it in a closure scenario.
If you're not sure I'd start with your auditors and/or accountants. You have a legal responsibility to get it right so it's worth taking professional advice.
Whether it's wise to do so in this scenario is a completely different question. It sounds like this is a permanent issue and you're only likely to prolong the inevitable so at face value probably not. Redundancy pay is a statutory requirement should not be considered as something that can be avoided.
However, if there is a prudent way which allows you to reverse the funding/cost trend whilst protecting your employees and beneficiaries then it may be workable. It might be worth considering what the rest of the balance sheet looks like, and what would happen to it in a closure scenario.
If you're not sure I'd start with your auditors and/or accountants. You have a legal responsibility to get it right so it's worth taking professional advice.
Edited by waterwonder on Sunday 30th July 21:14
Not in a judgmental way, as I can completely understand why you are asking this, but why would you want to?
If the charity is in decline then the end is inevitable so it wouldn't really be moral to run it into the ground at the expense of employees who had worked there a long time.
Or is it that you envisage a resurgence in the charity but it will take time?
If the charity is in decline then the end is inevitable so it wouldn't really be moral to run it into the ground at the expense of employees who had worked there a long time.
Or is it that you envisage a resurgence in the charity but it will take time?
Yes, I'm chairing a meeting tomorrow to thrash out changes we can implement immediately to try and turnaround the declining revenues.
As regards the statutory obligations & Trustee liabilities, I understand we are a company limited by guarantee so in the worst scenario, any trustee/director would only be liable for £1.
However, I'm sending red flags up re financial forecasts, reserves decline - and trying to get changes in operations.
Thanks all.
As regards the statutory obligations & Trustee liabilities, I understand we are a company limited by guarantee so in the worst scenario, any trustee/director would only be liable for £1.
However, I'm sending red flags up re financial forecasts, reserves decline - and trying to get changes in operations.
Thanks all.
if revenue is declining any action taken in the belief that it is more important to serve your charitable aims than to show fiscal responsibility is deluded.
ultimately you only have the ability to be charitable if you have funds, so your approach is the correct one. if others wish to continue, it is simple they need to find more revenue.
ultimately you only have the ability to be charitable if you have funds, so your approach is the correct one. if others wish to continue, it is simple they need to find more revenue.
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