Can not afford to make employee redundant.

I own & manage a very small business (ltd co.) with just two employees on the payroll - myself & one other.
The business has been loosing money for the last twelve months & over the past six months I have used all our reserves to keep the company afloat in the hope that we could turn things around.
I am now at point where I must either make my colleague, who has worked with me for 10 years, redundant or let the company go into administration.
Redundancy is impossible as the company cannot afford to pay the statutory minimum & survive.
If the company were wound up then my colleague would be able to make a claim from the state.
The dilemma I have is that on my own I could continue to make a modest living from the company & would prefer to keep it from going into administration.
Any advice or suggestions would be much appreciated.

Hi duster

You should go ahead and make your colleague redundant.

It doesn't matter that your company isn't in administration or declared insolvent; if you cannot afford to pay what your colleague is entitled to, he will still be able to claim for it from the National Insurance Fund.

You should make him redundant in the normal way, ensuring you follow correct procedure, and pay him as much of his entitlement as you can manage. He will then need to make a formal request in writing for the outstanding monies he is owed within six months, either to you or to an employment tribunal. Once he has done that, there is a form he will need to complete to claim his pay.

Hope that helps.

f your employer can’t or won’t make a redundancy payment you can make a claim for payment from the Redundancy Payments Office (RPO). The legal obligation for redundancy payments lies with the employer. If an employer genuinely can not afford these settlements, the RPO may be able to make the payments directly to the employees.

If your employer has been declared legally insolvent, the insolvency service who is dealing with your employers circumstances will give you an applications form RP1 which will enable you to make a claim.

If your employer has been declared legally insolvent this means the company has gone into:

* Liquidation with a court winding up order
* Administration
* Receivership
* Bankruptcy
* Voluntary arrangement with creditors
* The employer has died

If however your employer is not legally insolvent and you have been given an employment tribunal award, which the employer has not paid, you can apply to the Redundancy Payments Office (RPO) for payment.

As from April 2006 employees who continue to work for an insolvent employer while the business is being transferred to a new owner may be assisted financially by the National Insurance Fund.

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