I am trustee of a charity that employs one person. The charity needs to close because employment costs are greater than income. We have sufficient reserves to give due notice but cannot as well afford statutory redundancy. Do we have to pay redundancy money? or can we dismiss the employee with notice and then close the charity.Thanksmervyn
Province/Country relating to question: UK
Checked Charity Commission website
Hello and thank you for your question, which I will be happy to assist you with.
If the charity ceases to operate and the actual entity no longer exists then if no funds are available to pay for redundancy you do not have to pay them. Saying that the actual liabilities will depend on how the organisation has actually been incorporated and what its legal standing is - is it an unincorporated association, is it a trust, is it a limited company, etc
If this is a trust this is not a separate legal entity and the trustees can have liability for any debts incurred by the trust. Not an ideal situation to be placed in, although I would hope that the employee would not go as far as suing the individual trustees.
There is a possibility that the Insolvency Service may entertain a claim from them for payment through the National Insurance Fund, however that usually only applies to corporate bodies in insolvency so there is no guarantee he will be successful.
At this stage I suggest being upfront and honest with them and discussing with them the current financial standing of the charity so that they know exactly where they stand.
It is in fact a trust and is a Church with the minister who is also a Trustee (allowed by Charity Commission) is the employee. This makes your advice even more relevant.
The entity is a Trust which is a Church and the employee is the minister and a trustee. (allowed by charity commission).
The charity is in fact a Church constituted as a Trust. The employee is actually the minister and he is also a Trustee.
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Thank you, so do you mean that the minister will be potentially responsible for his own redundancy payment?
Yes I guess so
OK that could make things interesting and it is something that he would need to take into consideration before deciding on what further action to take
Could we dismiss him with notice and then close the Trust?
Dismiss him for redundancy still?
No dismiss him because the employment "is not working" in the sense that he has not a sufficient congregation
How long has he worked there for?
six years. The viability of the Trust has been discussed by trustees over last year and we have now come to the final position after members have left to go to other Churches.
To dismiss for capability reasons, i.e. that he is not performing his job properly, would require a fair process and it won't be fair to just dismiss him without giving him the opportunity to improve first. It may also make matters worse because he is not being made redundant, which could be a fair enough reason for dismissal, you are telling him he is not good enough for his job and that may prompt him to take action that he would not have done otherwise
Thank you - this is where we had got to but needed confirmation
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Expert in UK Employment Law
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