By Rob Adamson, Restructuring and Insolvency Partner, Armstrong Watson LLP

THE end of the furlough scheme is almost upon us and whilst it has undoubtedly preserved thousands of jobs, many businesses will be looking at whether they can afford to bring back all of their staff.

After the scheme ends on September 30, sadly not all employers will be able to reintroduce all their employees back into the business. From October 1 onwards, furloughed staff can be put on notice of redundancy, but complex rules around consultation will apply. Employees will need to be given adequate notice and the proper process must be followed. Statutory redundancy is based on the number of years an employee has worked, together with a weekly multiplier based on their age, with the weekly amount currently capped at £544 per week. When calculating the redundancy pay, the employee’s weekly pay is normally based upon their earnings over the 12 weeks before the day they got their redundancy notice.

Redundancy costs can be extensive, especially for longstanding members of staff over the age of 40. Notice pay must be accounted for, as must any outstanding holiday pay, and not forgetting the redundancy payment itself. It should be noted that redundancy pay should be calculated on what the employee’s pay would have been had they not been on furlough.

Where a business has depleted turnover levels, these costs can have an adverse effect on cashflow.

If your business would become insolvent as a consequence of making statutory redundancy payments, the Insolvency Services’ Redundancy Payments Service (RPS) can give the company a loan, which then must be repaid as soon as possible and the RPS will likely make a decision on a case by case basis. 

However, this might in turn, cause further cashflow issues. It is worth noting that the RPS will meet the costs of redundancy (up to certain statutory limits) where a company requires a formal insolvency process, including a Company Voluntary Arrangement (CVA). A CVA can often assist with a restructure of a business, especially when it has suffered a setback and is looking to restructure to become more resilient going forward. 

If you’re having to consider redundancies or if you are concerned about the viability of your business, discussing a restructure is likely to be worthwhile and the sooner you do this, the more options you will have. Contact Rob Adamson on 0113 2211336 or email