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Insolvency and Employee Rights

If you are laid off by an employer who is insolvent (which usually means they are going into Liquidation/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.

EMPLOYEE RIGHTS 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 redundancy.
It probably makes sense to define exactly what an employee can claim and also what the government 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 £464 per week.
There are four main categories of claim that can be made by an employee made redundant by an insolvent employer.

  • Unpaid arrears of wages. The RPO will step in and pay up to 8 weeks
  • Unpaid holiday. The RPO will pay up to 6 weeks or unpaid holiday pay
  • Redundancy. The RPO will pay
  • 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

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.

IF YOU ARE LAID OFF BY AN EMPLOYER WHO IS INSOLVENT (WHICH USUALLY MEANS THEY ARE GOING INTO LIQUIDATION/ADMINISTRATION) YOU CAN MAKE A CLAIM FROM THE GOVERNMENT FOR UNPAID WAGES, UNPAID HOLIDAY PAY, REDUNDANCY AND PAY IN LIEU OF NOTICE.

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 business 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.

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.