The insolvency of your employer will naturally cause you to be concerned, not only in relation to your future employment prospects, but also your entitlements in the event that you are made redundant. We are extremely sympathetic to all employees that find themselves in this situation. As well as providing full details of your entitlements, we will also provide you with as much assistance as possible during what is inevitably a stressful period. If your employer is declared insolvent and your contract of employment has been terminated, you may be entitled to claim arrears of pay, accrued holiday pay, notice pay and redundancy, subject to statutory limits.
Arrears of pay
If you are owed arrears of pay such as outstanding wages, commissions, or overtime, you may be entitled to make a claim from the National Insurance Fund by writing to the Redundancy Payments Office ("RPO"). The RPO will pay a maximum amount of eight weeks’ unpaid wages accrued prior to the insolvency at a statutory limit of £525.00 per week. Your claim will be subject to income tax and national insurance contributions. If you earn over £525.00 per week, any surplus will be treated as an unsecured claim in the insolvency proceedings. There is no qualifying period or age requirement in order to make a claim for arrears of pay.
As an employee, you will have a preferential claim in the insolvency proceedings for any arrears of pay accrued in the four months prior to insolvency, limited to a maximum of £800.00. This means that your employer’s assets will be distributed to you in preference to all other creditors, except for any creditor holding a fixed charge.
Holiday pay
You may also be entitled to claim up to six weeks’ unpaid/untaken holiday pay. The RPO will pay a maximum amount of six weeks’ holiday pay accrued in the twelve months prior to insolvency at a statutory limit of £525.00 per week. Again your claim will be subject to income tax and national insurance contributions. If you earn over £525.00 per week, any surplus will be treated as an unsecured claim in the insolvency proceedings.
Notice Pay
When making redundancies, an employer is required to give all employees sufficient notice. Where no such notice is given, an employee may be entitled to claim notice pay (also known as pay in lieu of notice or PILON).
Your statutory entitlement will be based on your length of service. You will be entitled to one weeks’ pay for each complete year of service, up to a maximum of 12 weeks, at a statutory limit of £525.00 per week.
As an employee, you are obligated to mitigate any notice pay claim. This will usually be the quantum of any benefits you are entitled to during the notice period, such as Job Seekers Allowance (“JSA”), or anything else earned during the notice period. It is important that you claim any benefits you are entitled to at the earliest opportunity. If you do not find alternative employment during the notice period, any benefits you would ordinarily be entitled to will automatically be deducted from your notice pay claim, even if you have not received them.
Redundancy
To qualify for redundancy pay, you must have been in continuous employment for two or more years. The RPO will pay your statutory entitlement at a statutory limit of £525.00 per week. If you earn over £525.00 per week, any surplus will be treated as an unsecured claim in the insolvency proceedings. Your claim will be subject to income tax and national insurance contribution. If you are aged between 18-21, you will be entitled to half a weeks’ pay for each completed year of service. If you are aged between 22-40, you will be entitled to a weeks’ pay for each completed year of service. If you are aged over 41, you will be entitled to a week and a halfs' pay for each completed year of service, up to a maximum of 20 weeks.
You can calculate your entitlement to redundancy by clicking on the following link www.gov.uk/calculate-your-redundancy-pay
Making a Claim
Your claims will be processed and paid by the RPO. On average, claims are paid within a period of 6-8 weeks. To ensure that your claims are dealt with as quickly as possible, accurate details of your claim will need to be forwarded to us as soon as possible. Should you have any queries regarding your claim, please contact the RPO directly – Birmingham RPO, Cobalt Square, 83-85 Hagley Road, Birmingham, B16 8QG, Tel: 0330 331 0020.