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Legal


Sector Focus Prepare for the cost of redundancies


Smaller businesses looking to reduce their workforces should urgently prepare for the costs of redundancies, following changes to the coronavirus job retention scheme made late last year. That’s the warning from human resources


experts The HR Dept, which provides human resources advice and support for more than 6,500 small and medium-sized businesses (SMEs) across the UK and Ireland. Rule changes last December mean that furlough


grants can no longer be used to contribute towards notice pay, something that HR Dept believes many smaller businesses will be unaware of. The firm believes this will prove a major


challenge for some small businesses, many of which are struggling to survive this crisis, once the furlough period comes to an end in September. HR Dept director Sara Abbott said: “Last year,


employers could use the furlough grant to cover the redundancy notice period, topping up the remaining 20 per cent to full pay. “Employers might not realise that this 80 per


cent contribution towards notice can’t happen again. As things stand, changes in furlough rules mean that the employer will not be able to use the furlough grant and will need to pay the notice in full, without government support. “Other employers may not understand


employees’ statutory rights to notice periods, or age factoring when considering redundancy pay. “In any case, employers need to be aware of these issues and start preparing now.


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“Particularly where the employees facing


redundancy have long service – this is likely, as they are the most experienced and will have been the most expensive to make redundant last year and remain on furlough – the coming costs could well push businesses under.”


‘Employers might not realise that this 80 per cent contribution towards notice can’t happen again’


To avoid this, the HR Dept is calling for a further


change to the rules to allow the furlough grant to once again be used to contribute towards notice pay again, as was the situation last year. Ms Abbott said: “If the furlough grants could be


put towards notice pay again, employers could potentially start the redundancy process now. Then, if the situation proves less dire than expected, they simply retain the employee and stop the notice period – at no additional cost to the business or the taxpayer. If the redundancy still needs to take place, much of the notice pay cost has already been absorbed. “It wouldn’t cost the Government any extra.


However, with the reality of redundancies rapidly approaching, this measure would let small businesses take those decisions now, so we can avoid a mass of insolvencies further down the line.”


Sara Abbott: Government should reverse furlough regulation changes


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