Charity redundancy payments

SarEl

suemm2011 wrote: »

Sarel- thank you for your comments. We had already sought free legal advice from a business specialist with regards the reductions we had to make in hours etc- and although we did have to cut hours we always did so with staff agreement- we have only acted within the bounds of contracts and would NOT risk being pursued for unfair dismissal which would happen if we had done otherwise. We have been trying to follow all correct proceedure. However we have NOT been told that operating without redundancy reserves is trading whilst insolvent- that is a new one on us.
The Charity Commission is aware that we are closing but I do not know if they are aware that we do not have redundancy funds in place. We had always been told that as we were a charity we were not covered by the government scheme and that staff had to take us to tribunal- no one seems to be able to give a straight answer as to how the whole process works and it is very frustrating! We have been in contact with various people and it has not been flagged that we shouldn't keep running without the reserves in place.

OK - I will try to go through this point by point.

I did not suggest that the initial cuts in hours was done wrongly - I was responding specifically to the advice from another poster that you cut the hours again now. That is immoral advice - and would land you in a tribunal if the staff were so minded. You have already served them redundancy notice and to them cut their hours would transparently be an attempt to reduce your redundancy liability.

You should certainly have been told that you were trading whilst insolvent if you were trading knowing that you could not meet your cerditors demands (the redundancy payments). Trading whilst insolvent includes knowing that you will not be able to meet your obligations in the future.

You really need to talk to the Charity Commission about the fact that you will not be able to meet your redundancy obligations. They need to know.

OK - I will give you the full and staright answer, because I do know. I think that the advice you have recived is conflicted because of the position you are in. The government scheme covers all employees if their employer cannot meet their obligations (within certain rules about what they will pay and how much they will pay). You are an employer, so your staff are covered by the scheme. In any circumstances, the first call for these payments is on the employer - usually, but not always, a company that has gone bust. An insolvency practitioner arrives to liquidate the assets, and tries, effectively, to get blood out of the stone - to turn as much as they can into cash, so pay the debts. The first debts that must be paid are those to employees. With me so far and does this make sense?

In the case of a limited company, this is the only money that the liquidator can touch - company money. Because the legal entity is the company - not the people who run it.

In your case the situation is unincorporated - as trustees you have taken on the responsibility for the charity in law - in effect you are the charity and not the name you go by. So if there are debts to pay, the first port of call is you and your assets - either individually and /or together as trustees. So if you have three trustees they can be sued for the debt, but if two have no assets then the creditor can go after the third one's assets and take the whole debt from their assets.

So yes, the staff would, if you failed to pay them their redundancy payments, have to go to a tribunal after you as trustees. I would bet they don't want to do this, but they may have little option. Because if and when they apply for any means tested benefit, whether or not they need it immediately, they will be asked what happened to their redundancy money. If it is below a certain threshold, then it isn't counted for benefits - but the benefits people will want to know where it is. And if they have not had it, and they have done nothing to recover it, it may be treated as "available income" and result in a loss of benefit. The same sort of thing can happen if you have money tied up in certain types of accounts where you have saved it but cannot take it out until a pre-agreed date - it still counts as available money.

So, they staff may find that whatever their personal feelings are, they have no choice but to pursue the money owed. That is, as I said, a case against the trustees. If they win (and they assuredly would) and you fail to pay, then the debt collectors come around to your "place" to try to get the debt. If they fail to secure enough assets or money from you to pay it, then the government scheme steps in.

This is not because you are a charity - the same thing would happen to a sole trader or other unincorporated employer - it is because you are the legal entity that the debt is incurred by and not the charity.

Does that explain the situation? I am sorry that it is pretty scary stuff - that is why I always advise charities to incorporate, especially if they have any staff.

suemm2011

Thank you! A clear answer I can use Not that I like it but I knew I wouldn't. We know we are liable and have known since we realised our situation- it was more the 'how it worked' - so the government scheme only steps in if we the trustees (there are 5 of us) cannot meet the debt. Tribunal comes first. Because, believe it or not, it does concern me that we don't have the money for the staff. A volunteer, yes, poorly informed? yes, worked myself silly over this? yes, mean and unkind? NO!- I know it must be hard having a team of ever changing volunteers as your managers- can't believe the system was ever set up like that in the first place but that is another issue!
We did look into incorporation- and were pursuing it- but again all too little too late for us- but if we can be a warning to other charities then I'll shout it form the roof tops- get incorporated!!!!!! And if you feel tempted to stand as a pre school committee member to 'help out with fund raising'- get the facts first. Believe me when I say none of us knew what we were letting outselves in for.

:T Thank you again- really appreciate your help and advice

SarEl

You are welcome. I knew you weren't the awful kind - it was obvious that you are as concerned for the staff as yourselves. And if it is any consolation, in the worst sense of the word, I will be adding this sorry tale to my existing bunch of scary stories to tell charities to make them incorporate! I find that such stories are a strong motivation!

But you have had some other good advice here too - use it. Speak to the Charity Commission so they know what is happening. Speak to your CVS or VAC. Speak to your council. There may be someone who can help you out. I know this isn't the tiume to be asking - especially not for money. But you have nothing to loose. And the staff stand to loose a lot, so it is worth doing for their sakes. £8k between them isn't a lot each - but it may be a lifeline in a dire situation, and jobs aren't easy to come by as you know.

kazzah60

May I say Thank you to SarEl for his/her excellent explanations of the situation

I have been a trustee of a small charity for 18 years working virtually full time in a voluntary capacity - I have often been told/advised by kind thinking members that i should receive a salary and my role should be formalised

this example is just ONE good reason why I ( personally) don't want to draw a salary for my role- the whole situation of being a charity and also an employer involves so much legislation ( health and safety, personnel, lone worker policies etc etc) that the stress of keeping on top of the changing rules and regulations would make me ill !

We tick along nicely and because my dear hubby works in the voluntary sector for a Volutary Action membership organsation, I have access to excellent advice and information which helps me in my role as Chairperson

We regularly send our trustees on trustee training with the local voluntary action organisation ( training with them is very affordable- usually £10 per delegate) to ensure our Trustees are well aware of their statutory obligations

our organisaiton prides itself of being "voluntary, but not amateur" - sadly lots of charities are just that - very amateurly run, by trustees with very little factual knowledge of the laws governing charities.

Rather than a compulsory CRB check for volunteers and Trustees - I would much rather see compulsory Trustee training - it would certainly ne a revelation to many of them.

SarEl

Could I point out that health and safety obligations apply to volunteers as well - they are not just rights for employees. The statutory basis of health and safety legislation is slightly different than for employees in some cases, but just as valid. And volunteers / charities can also be sued - it isn't just about being an employer. Incorporation is often well advised whether you are an employer or not, and especially so if you are. We now live in the sort of society where people are much more litigatious and tend to sue people for just about anything - charities included.

But I do agree that training for people involved in managing charities is a must - it is often the lack of training and knowledge that leads to things going wrong.

kazzah60

SarEl wrote: »

Could I point out that health and safety obligations apply to volunteers as well - they are not just rights for employees. The statutory basis of health and safety legislation is slightly different than for employees in some cases, but just as valid. And volunteers / charities can also be sued - it isn't just about being an employer. Incorporation is often well advised whether you are an employer or not, and especially so if you are. We now live in the sort of society where people are much more litigatious and tend to sue people for just about anything - charities included.

But I do agree that training for people involved in managing charities is a must - it is often the lack of training and knowledge that leads to things going wrong.

sorry- should also have stated that we volunteer and "work" from our own homes, very little one to one contact and only 2 major events per year, which we always do risk assessments for and of course we have public liability insurance
most of our "work" entails answering e mails and sending out information to families with disabled children ( all of which has been vetted and approvedby appropriate bodies of course!)

I appreciate that H&S is an important part of peoples working environment, even if they are volunteers - apologies for not making myself clearer!