Posted by Bishop Fleming on October 19, 2017
If your employer is unable to pay its debts, including your wages, it is likely to be insolvent. Your options depend on whether your company has entered a formal insolvency procedure. Sam Hawkins explains.
This advice assumes that they have, but if not you should contact Citizens Advice or ACAS in the first instance for advice.
If you work for a company this means it will be in one of the following
If you work for an individual (normally it does not have ‘Limited’ or ‘Ltd’ in its name, although there are exceptions), this is called either
Either an ‘insolvency practitioner’ or the ‘Official Receiver’ will be appointed to act in these circumstances.
You might be asked to keep working by the appointed professional where there is a chance to rescue the business or it could be sold. This does not affect your rights to redundancy pay if the business closes down in the future.
The Government uses the National Insurance Fund to pay employees some of the monies owed to them. If applicable you can claim for the following items:
Entitlement is achieved following 1 month of completed service. It is then based on 1 week for each year of service up to 12 weeks. This payment is compensatory in nature. In order to calculate it the Government will compare the amount you would have received over the relevant period if you still had your job compared to the amount you actually earned over the same period. They will assume you claimed Job Seeker’s Allowance or Universal Credit if you don’t have a job in that period - even if you didn’t. It is therefore important to contact the Job Centre as soon as possible following redundancy.
As an illustrative example:
Bob, aged over 25, is paid £300 per week and has been working for ‘Gone Bust Ltd’ for 5 years. He is therefore entitled to 5 weeks wages as compensatory notice pay less any deductions. This is calculated at
|5 weeks’ wages||£1,500|
|Notional Income Tax||(£227)|
|Assumed Job Seeker’s Allowance, say||(366)|
|(5 weeks @ £73.10)|
|Amount to be Received||£907|
Entitlement is achieved following 2 years of completed service. The calculation is based on length of service and age. This can be calculated at https://www.gov.uk/calculate-your-redundancy-pay. This payment is tax and national insurance free up to £30,000.
Tax and National Insurance deductions will apply. A protective award can be determined by an employment tribunal.
Tax and National Insurance deductions will apply
These are paid directly to your pension company and you will need to discuss this with the insolvency practitioner.
This would be awarded by an employment tribunal. These claims are capped at £489 per week (before deductions), although any shortfall can be claimed directly in the insolvency of your employer. Your contract might entitle you to amounts above the minimum statutory allowances, but this would not be paid by the Government. It would depend on the individual circumstances of the insolvency if you would receive additional amounts you’re owed above those paid by the Government.
You can claim online at https://www.gov.uk/claim-redundancy once you have been provided with a claim reference from the appointed professional.
If you receive any of the following statutory payments, these are paid by HM Revenue & Customs
You will need to directly contact the Statutory Payment Disputes Team on 03000 560 630.
Once you are informed that your employer is insolvent and will no longer be able to employ you, your priorities will be to obtain a claim reference so you can claim from the Government, and to contact the Job Centre to begin your job search and begin to receive Job seeker’s allowance.
Further advice can be found at https://www.gov.uk/government/publications/redundancy-payments-rp1-fact-sheet.
If you would like to discuss these issues in confidence, please contact a member of our Business Recovery & Insolvency team.