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Insolvency And Employee Rights

The quick answer

If you are laid off by an employer who is insolvent (which usually means the employer is going into Liquidation or Administration) you can make a claim from the Government for unpaid wages, unpaid holiday pay, redundancy and pay in lieu of notice. Usually claims take about two to four weeks to be processed once the employer is in formal insolvency e.g. the date of liquidation.

If your employer had more than 20 employees then they should have entered into a period of 90 day consultation. However insolvent employers do not have the time to do this as thy do not usually have the funds. In addition there is nothing to consult about such as reduced hours if the outcome is closure and liquidation.

In more detail

Redundancy costs and how they will be paid are not just a worry for employees, but also a concern for employers that have been trading a long time.

The longer you have been employed the more you are entitled to and sometimes business feel they cannot close or restructure because they cannot afford the costs of redundancy.

It probably makes sense to define exactly what an employee can claim and also what the government will step in and pay.

In all cases, where the government steps in to pay, they use the Redundancy Payments Office (“RPO”) and cap the payment based on a maximum income of £538 per week. This was at 20th April 2020.

You can not make a claim as an employee or director until the employer is in formal insolvency for example the date of actual liquidation or Administration. The claims is made online through the https://www.gov.uk/claim-redundancy.

 

There are four main categories of claim that can be made by an employee made redundant by an insolvent employer.

  1. Unpaid arrears of wages. The RPO will step in and pay up to 8 weeks.
  2. Unpaid holiday. The RPO will pay up to 6 weeks or unpaid holiday pay.
  3. Redundancy. The RPO will pay based on the years of complete service.
  4. Pay in lieu of notice – this is where you have worked your notice and not been paid or were made redundant without the proper notice. 

Employees may also be able to claim protective awards for example such as unfair dismissal.

Redundancy claims

The redundancy you can claim is based on your age and the number of complete years worked for the same employer (including under TUPE transfers). It is a complex calculation, but the maximum claim is for a person over the age of 41 who has worked 20 years. They can claim 20 x 1.5 weeks = 30 weeks’ pay. For under the age of 41 it is a week a year worked.

Pay in lieu of notice is based upon what’s in your contract and statute. It means you should have been given notice if your employment is ending and time to find a new job whilst working out your notice. Quite often insolvent businesses close without any warning at all, which is when you will be entitled to notice pay.

The minimum statutory notice is one week in the first two years of working then a week per year up to a maximum of 12 weeks’ notice (for 12 years continuous employment).

A Word Of Advice

When working out notice and redundancy, you add the notice period you should have been given to the length of time worked. For example if you have worked for an employer for 23 months and you are entitled to one months’ notice this takes you to 24 months and you will therefore be entitled to a claim based on 2 years.

Contact Us Today

If you would like further information regarding insolvency and employee rights please contact us today. 

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We have just worked with Kirks to complete the closure of our company. Everything went smoothly and professionally. I would recommend this firm and the staff who were very very helpful and quickly finalised everything. Thank you Kirks.
Carol Hill
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