Financial Assistance with Redundancy Payments

With the end of the furlough scheme this month more businesses may need to understand about the interest-free, unsecured redundancy loans provided by the Redundancy Payments Service.

The ongoing economic challenges due to COVID-19 indicate that for some there will be tough times ahead. Once the government’s Job Retention Scheme comes to an end, furloughed employees may need to be made redundant as a cost-cutting measure to allow continuity of trade.

It is not widely known that the Redundancy Payments Office (RPO) may be able to help with making redundancy payments on behalf of an employer. The primary objective of this financial assistance scheme is to save jobs based in the UK by helping businesses fund the costs of redundancy. High redundancy expenses can potentially add further financial risk to a business and ultimately jeopardise the retained jobs.

How do Redundancy Payment Loans work?

Direct payment is made to redundant employees from the National Insurance fund when an employer’s application has satisfied the qualifying criteria. Once an application is approved and claims are paid, the employer enters into a formal undertaking to repay the debt in fixed monthly instalments. The repayment amount and the term are negotiable, and no interest will accrue on the debt owed.

Applications can be submitted in circumstances where redundancies have already been made, however statutory entitlements can no longer be met upon staff leaving the business or thereafter.

The criteria for a company that wishes to make an application are:

• The business will continue to trade after roles are made redundant
• The business can save some of the jobs of its workforce by making some roles redundant
• The business can demonstrate it can repay the resultant debt in full
• The business has been refused a loan by its bank
• The business can provide documents to support it has no funds from which to make the redundancy payments itself
• The business can confirm that it has undertaken all possible cost-saving exercises
• If the business is part of a group, it would have to provide evidence that there are no funds within the rest of the group to assist with redundancy costs and the RPO would need a guarantee.

For more information, please contact the Optimise team – telephone 0808 178 0024, info@yourinvoicefinance.co.uk