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June 9, 2020

furlough employees

Our client was a small business who asked us to help them as they were having difficulty in meeting their financial obligations.  They employed 6 people on a few varying contract terms.

They had contracts of employment and good policies and procedures in place.  The owner manager had been paying staff out of his own pocket for several months to meet their wages but was finding that this could not go on.

Solution:

We audited all contracts and policies and found them to be meeting legislation.  They had a redundancy policy that met the statutory requirements.

We had an open and honest conversation with the owner to determine the exact financial position of the business.  He agreed that the business was not viable in its current form!

We proposed the following options that he could consider:

  • 1. Closing the business and making all employees redundant;
  • 2. Asking the employees to reduce their contracted hours;
  • 3. Asking the employees to take a cut in salary;

We advised that option 2 and 3 would involve meeting with the employees and getting them to agree to a change of terms and conditions.

We advised him of his liability if he chose the redundancy option:

  • Over 18 up to age 21 0.5 weeks salary;
  • Over 21 1 weeks’ salary for each year worked up to age 41.
  • Over 41 1.5 weeks salary for each year worked up to a maximum of 20 years.

Outcome: 

He decided to meet with the employees to ask them to consider taking a cut in hours and or salary.  Only one employee was willing to accept this offer.

Our client was therefore left with no option other than to close the business, which he did.  We issued at risk of redundancy letters on his behalf to his employees.

We drafted, calculated the redundancy payments, and issued the letters to his employees in line with the current legislation notifying them that their job had become redundant due to the business closing.

Learned

It is never wise for an employer to let personal feeling interfere with their business decisions.  This client had been paying wages out of his own pocket for months but when he needed some support from these employees, they refused to give it.

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