URN05-1156

Introduction

Under Part XI of the Employment Rights Act 1996 employers must by law make a redundancy payment to employees who qualify for one when they are made redundant. Broadly speaking, this means employees with two or more years of service. Employees can enforce their rights through an Employment Tribunal. If you (the employer) do not comply with a tribunal award, the Insolvency Service's Redundancy Payments Office (RPO) will make the payment to satisfy the provisions of the Act. The RPO will then actively seek to recover the payment from you.

However, besides not receiving the payment quickly, this means the employee may have to go through the stress of a Tribunal having already suffered from the loss of their job. It can also cost you time in having to attend a tribunal hearing.

The RPO is aware that in exceptional circumstances you may not be able to make a redundancy payment when it is due without jeopardising further jobs, for reasons outside your control. If so, you can apply to the RPO for help in meeting your legal obligation. If the RPO can help, it will pay the employees directly from the National Insurance Fund on the condition that you will repay the money as soon as possible. 

This booklet gives basic information on the types of situations where the RPO will consider giving such help, and the information you will need to provide. You can request more information from the RPOs listed at the back of the booklet.

When will the RPO consider giving help?

The RPO will consider giving help only when:

• you have provided documentary evidence that you lack the funds to make the statutory redundancy payments;
• it is clear that providing help will save a significant number of jobs;
• the help will secure the solvency of the business for the foreseeable future;
• you have clearly shown that you will be able to repay the money within an agreed period of time.

How much can the RPO pay?

Please remember that the RPO can make only the statutory redundancy payments that you must pay under the Act. The amount is the number of weeks due multiplied by the normal week's pay, or the statutory limit, whichever is the lower. The statutory limit is at the time of printing is £280 per week. There is a ready reckoner to assist you in your calculations at the end of the booklet. 

If you have agreed to make payments greater than those required by the Act and can cover the extra payments, then you must make the statutory payments first. The RPO will consider helping with a shortfall in the statutory amounts only.

What other help should you consider?

Please remember that under the Enterprise Act 2002 you may be able to use other more appropriate sources of aid to help you recover from financial problems. You should consider these sources and seek professional advice.

What information will we need?

As you have the main legal obligation to make redundancy payments, the RPO will need to be satisfied that you cannot fulfil it. You must give us at least the following:

• an explanation of why you need to make the redundancies and cannot make the payments;
• your latest management account;
• your last 3 months' bank statements (see the next section on bank statements);
• your last set of audited accounts;
• evidence that you have explored other sources of finance without success, such as written confirmation from your bank that they will not provide or increase any overdraft facilities, and why;
• wage and employment details for the individuals concerned so the RPO can calculate the payments due.

What kind of bank statements will you need to show?

If you are a sole trader or a partnership, you must supply your personal bank statements in addition to business statements. This is because as a sole trader or partner you are personally liable for the redundancy payments.

How do you repay?

You must agree to refund to the RPO any money we pay to your employees, and the RPO will normally require you to complete a banker's order before making any payments. The period of repayment will depend on the financial position but it is essential that you repay as quickly as possible.

If you are part of a group, or have any associated companies, the other companies must accept the obligation to repay in case you fail to do so.

The RPO reserves the right to take legal action if necessary to recover the debt.

How to apply

If you think you would qualify for assistance, please contact the RPO that covers your area. The office will make an appointment to discuss your application in detail, so please supply as much supporting documentary evidence as possible before the meeting. After the meeting you can send the RPO any more information it needs.

Addresses of Redundancy Payments Offices

Insolvency Service
Redundancy Payments Office
Ladywell House, Ladywell Road
Edinburgh
EH12 7UR
Tel: 0131 316 5600
email: Erpo@dti.gsi.gov.uk
Scotland, Cleveland, Cumbria, Durham, Merseyside, Northumberland, Teesside, Tyne and Wear, Yorkshire

Insolvency Service
Redundancy Payments Office
PO Box 15, Exchange House, 60 Exchange Road
Watford 
WD18 0YP 
Tel: 01923 210 700
email: Wrpo@dti.gsi.gov.uk
All London boroughs, Buckinghamshire, Essex, Hertfordshire, Kent, Suffolk, Surrey, Sussex

Insolvency Service
Redundancy Payments Office
Cobalt Square, 83-85 Hagley Road
Birmingham 
B16 8QG
Tel: 0121 456 4411
email: Brpo@dti.gsi.gov.uk
All other areas

Helpline

A national helpline is available to answer any of your queries. Telephone: 0845 145 0004 (all calls are charged at local rates). 

The Ready Reckoner

Read off the employee’s age and number of complete years’ service. The table will then show how many weeks’ pay they are entitled to. The table starts at 20 because no one below this age can qualify for a redundancy payment. 

If any employees are aged between 64 and 65, the amount due will be reduced by one twelfth for every complete month of employment after age 64.