If your employer has failed, you are not left with nothing. Here is what you can claim, from whom, and how the process works.
If your employer has gone into liquidation or administration, the immediate worry is usually a practical one: what am I owed, and who pays it?
The short answer is that you are not left with nothing. There is a statutory scheme designed for exactly this situation.
What you can claim
Where an employer is insolvent and cannot pay, employees can claim from the Redundancy Payments Service, which pays out of the National Insurance Fund. The main elements are:
- Statutory redundancy pay: based on your age, length of service and weekly pay, subject to statutory caps.
- Arrears of wages: pay owed for work already done, up to a statutory limit of weeks.
- Holiday pay: accrued and untaken holiday, and in some cases holiday taken but unpaid.
- Statutory notice pay: compensation for the notice you should have received.
Each element is subject to statutory limits, both on the number of weeks and on the weekly amount. This means employees with long service or higher salaries may not recover the full sum owed from the scheme, and the balance becomes a claim in the insolvency itself, where it may attract a dividend.
How the process works
- The office holder collects your employment data: start date, salary, holiday entitlement, and what you are owed.
- You receive a case reference number. You need this to claim.
- You submit your claim online to the Redundancy Payments Service. You do this yourself; the office holder cannot do it for you.
- Payment is made, usually within a few weeks of a complete application.
- Notice pay is claimed separately, after your notice period has expired, because you must first give credit for anything earned elsewhere during that period.
Some elements rank ahead of other creditors
Certain employee claims are preferential in the insolvency, which means they rank ahead of floating charge holders and unsecured creditors for distributions. This applies principally to arrears of wages up to a statutory limit and to holiday pay.
In practice, the Redundancy Payments Service pays you first and then takes over your preferential claim against the company. You do not need to wait for the insolvency to conclude to be paid.
If the business is sold rather than closed
Where a business, or part of it, is sold as a going concern (often out of an administration), the TUPE regulations may apply, and employees may transfer to the buyer with their continuity of employment preserved. In that case, there is no redundancy, because there is no dismissal.
This is one of the reasons a trading administration is worth attempting where a business has value: the alternative frequently means everyone loses their job.
Where to get help
The office holder’s staff can tell you where your claim stands and provide your case reference. If you disagree with the figures used, say so: errors in holiday or service data are not unusual and are fixable.
For general advice on your employment rights, ACAS and Citizens Advice are both free and independent.
If you are a director of the company rather than an employee, your position is different and more complicated: you may still be an employee for these purposes, but it depends on the facts. That is worth a conversation.