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Jenny, Solicitor
Category: Law
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Experience:  Qualified Solicitor specialising in Employment Law and general legal matters. Please start your question For Jenny Only
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My UK based Ltd company has had severe cashflow issues since

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My UK based Ltd company has had severe cashflow issues since xmas, following our worst year of xmas sales in over 12 years business. I have three full time staff one of which has only worked here for 7 months, the others for over 2 years. I also have 12 part time staff. In the past three weeks, I've only just had enough income to cover wages and only then by not paying overdue invoices to suppliers. We are at the bottom of our overdraft facility which cannot be increased. Having looked into the possibility of reducing hours for all staff, laying off some part time staff and making the 7 month full time person redundant, It seems I'd still have to pay them whilst layed off, and would have to continue paying the redundant person for at least 30 dayys notice which wouldn't help at all. We can operate the business by reducing hours by about 30% across the board, plus making the one person redundant but can I legally do this, given that we have history of changing only part timers hours according to business requirements ? Also, what happens if we simply can't pay because the cash isn't there to pay them statutory payments ? Thanks for any advice you can give.
Hello and welcome to Just Answer,

The first point is that it is not possible for you to lay off or put employees on short time working unless your contract gives you the specific right to do so. You should check that it does. If your contract gives you the right to do so then you would not have to pay full pay for lay off but would have to pay guarantee pay of £24.20 for a day for up to 5 days in a 3 month period.

As regards XXXXX XXXXX with 7 months. You would have to pay contractual notice. Statutory notice is the minimum and that would be one week. However if your contract states a month then they are entitled to a months pay.

You cannot just reduce hours. What you could do is consult staff about the difficulties you are having and that you are looking to alternatives to redundancy and see if they will agree to an immediate reduction to save their jobs. Hopefully they will agree to do so.

If you can't continue paying and have to make redundancies there is a government scheme to protect redundancy pay and other payments such as notice and outstanding holiday. This effectively comes from the National Insurance Fund. In order for the employee to qualify the employer must be insolvent.

Please remember to give positive feedback. I will be happy to answer your follow on questions.
Jenny and 2 other Law Specialists are ready to help you
Customer: replied 5 years ago.

Thanks very much for that info.

We don't have contracts in place as it's all been quite informal due to almost all being friends prior to being employees. However I've read that if there is proven history of work hours being adjusted to meet business needs, then that is implied as contractual for this business. Would that be correct ?

Yes that is correct if you have varied hours in that way before then you can argue the right to do it now through custom and practice. I would advise putting contracts in place as soon as possible. Legally employees are entitled to them.