Financial Help for Businesses That Need to Make Redundancies

Although we seem to be coming out of the recession, experience tells us there are still some tough times ahead and that further cost-cutting and reconstruction of businesses may be necessary in order to allow them to carry on trading.  Very often companies need to consider redundancies for many reasons including lower order levels and more efficient working practices.  Sometimes a redundancy programme is the only viable way to stay in business - some jobs have to be sacrificed to save the others. 

At Marshman Price we often find that employers in this position are concerned about how they can afford to make people redundant.  After all, if they can afford the redundancy payments, why do they need to make the lay-offs in the first place?  Well, unfortunately the answer is often that they can’t afford the redundancy payments, however all is not lost if this is the case: there is help at hand from an unlikely source – HM Government!  Where a business can show that the proposed redundancies will allow it to survive, the Redundancy Payments Office (RPO) may actually make the payments on behalf of the employer – effectively as an unsecured, interest-free loan which the employer then repays over an extended period.

How does it work?  To qualify for help under the “financial difficulties scheme” the employer must demonstrate that its financial circumstances prevent it from making the payment and that it has already explored all other reasonable sources of finance without success – such as bank loans or overdrafts, etc. – and that it will be able to repay the money in due course.  There is a one-page questionnaire to complete and submit to the RPO, along with copies of recent accounts and financial projections to demonstrate that the business will be profitable in the future and to give the RPO an idea of how much the employer can repay monthly if the assistance is granted. 

Employers in the County who find themselves in this position should contact the RPO in Birmingham on 0121 678 1801.  They may need to get their accountant’s help in completing the accounts and forecasts or alternatively they can contact an insolvency practitioner, such as Marshman Price, for further advice or assistance.

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