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What can employees claim in a liquidation?

We often see companies that have been established a long time that cannot afford to downsize and make staff redundant due to the costs.

We often see companies that have been established a long time that cannot afford to downsize and make staff redundant due to the costs.

This often forces the company employer into liquidation.

As an example, an employee who has 20 years’ of continuous service and is well over the age of 41 can be due 30 weeks redundancy pay plus 12 weeks’ notice pay on being laid off. That can be a substantial amount of money for a company to find. 

What often surprises the directors is that there is a government fund called the Redundancy Payments Service (RPS) that will pay the redundancy costs on liquidation or administration. This news can be a relief to the directors (and they can usually claim as well). 

Interestingly, the RPS can also loan money to a solvent company to help to pay the redundancy costs if they have exhausted all other avenues of finance. This loan is made under the Financial Assistance Scheme. 

Employees can claim:

Redundancy

They can claim a week per complete year worked and a week and a half for any service over 41 years of age. There is a maximum claim of 30 weeks. The weekly pay is capped at £544 per week.

Pay in lieu of notice

The entitlement to this can be written in an employment contract but the RPS uses a maximum of a week per year worked up to 12 weeks. 

Holiday pay

An employee can claim up to six weeks of unpaid holiday. 

Arrears of wages

An employee can claim up to eight weeks of unpaid holiday.

All payments under these categories are capped at £544 a week. Employees earning above that have an unsecured claim in the company insolvency.

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David Kirk

Licensed Insolvency Practitioner