Guidance

Financial assistance for employers unable to pay statutory redundancy payments

Updated 1 June 2022

Applies to England, Scotland and Wales

Financial assistance for employers unable to pay statutory redundancy payments

If you cannot afford to pay your employees redundancy pay, you can apply to the Redundancy Payments Service (RPS), part of the Insolvency Service, to make payments directly to your employees.

You must demonstrate that you have exhausted all other funding options available before applying for this scheme. When you apply, we require written evidence that you have done so.

As the employer, you are financially liable for payments to your employees. If we make payments to your employees, it will create a debt to us. We may take enforcement action if it is not repaid.

1. What you must pay when making employees redundant

Most employees who have worked continuously for a business for 2 or more years will be entitled to statutory redundancy pay.

The amount of statutory redundancy pay each employee is entitled to is calculated based on their age, length of employment, and weekly rate of pay. If you make an application, a completed copy of this redundancy calculator is required.

Redundant employees may also be entitled to other payments, such as notice pay, and holiday pay. We cannot make these payments for you, unless the company enters formal insolvency.

2. Who can apply

Any employer not subject to formal insolvency proceedings can apply. This includes businesses that:

• are still trading
• have stopped trading but not entered formal insolvency
• are going to stop trading soon, but are not expecting to enter formal insolvency

3. What we can pay

We can only make payments for of redundancy pay, unless the company is subject to formal insolvency proceedings. If you apply for payments through this scheme, we cannot make any other types of payments such as arrears of pay, holiday pay, or notice pay unless you enter formal insolvency proceedings.

Redundancy payments made by the RPS are subject to statutory limits. These include a maximum of 20 years redundancy and there is a cap on the weekly rate of pay.

If approved, we will make statutory redundancy payments directly to the redundant employees on your behalf. If you make redundancy payments directly to the employees, they cannot be included in the application. We are not able to pay statutory redundancy payments to an employer.

We may require employees to apply to the employment tribunal before making any payments.

4. Eligibility

To be eligible for financial assistance from us, you must provide evidence that you cannot afford to pay your employees statutory redundancy pay. This includes providing documentary evidence from other funding schemes.

You must also provide evidence that employees are eligible for statutory redundancy pay. This means the employees have been continuously employed at the business for 2 or more years.

5. How to apply

If you think your business qualifies for assistance, contact us including:

• a completed copy of our evidence checklist
• a completed solvent employer case set up form
• details of employees who would be receiving redundancy payments

We cannot assess your application until we receive all the required information. If we receive an incomplete application, there will be a delay in our response.

6. Your continued liability for redundancy payments

If the RPS makes statutory redundancy payments direct to employees, it will create a debt to us, and we will recover the cost of the payments from you in the future.

If you fail to repay the debt, we may take enforcement action. If you are concerned about any personal liability, seek independent professional advice.

7. Other things to consider

Under the Enterprise Act 2002, businesses may be able to use other, more appropriate sources of aid to help recover from financial distress. Further information is available from the Advisory, Conciliation and Arbitration Service or Business Debtline.

As a business in financial difficulty, it is your responsibility to consider whether it remains appropriate to continue trading and to seek professional advice if you are unsure.

We cannot advise you on this and acceptance or rejection of an application is not an indication that you should, or should not, continue to trade.