2 Mins
Having worked in insolvency for many years, I’ve found that employees often have similar concerns when their employer is in financial trouble. Facing redundancy can be overwhelming, and certain questions tend to arise repeatedly. To address these concerns, here are the most frequently asked questions by employees about the insolvency process and how it may affect them.
What are my redundancy rights and entitlements?
You are entitled to claim for:
- Arrears of wages
- Holiday pay
- Redundancy pay (if you have worked for your employer for at least 2 years)
- Pay in lieu of notice (subject to your earnings during your notice period)
If your income varies, weekly pay is averaged over the last 12 weeks before you were made redundant.
Statutory redundancy pay is based on your age, weekly pay and the number of years you have worked for your employer. The government has a handy online redundancy calculator here.
Notice Pay is based on length of service—at least 1 week’s notice if you have been employed between one month and 2 years. One week’s notice for each full year worked after 2 years up to a maximum of 12 weeks’ notice.
Payments are capped at a weekly statutory maximum which is currently £700.00.
If you are due more than that, you can lodge a claim in the liquidation for the balance alongside other creditors.
Who will pay my unpaid entitlements?
The short answer is the government. The Insolvency Services department steps in and pays your entitlement, up to their statutory limits, and then they lodge a claim in the liquidation.
The Insolvency Practitioner will apply to Insolvency Services for a unique code and give it to employees, along with guidance on how to make their online application.
Insolvency Services will process your claim and pay you directly; payment does not go through the Insolvency Practitioner.
The Insolvency Practitioner can also apply to Insolvency Services to pay pension schemes pension contributions previously deducted from wages but not paid over.
If your claim is over the Insolvency Services ceiling, you can claim the balance from the liquidation.
Will I be taxed?
Yes, arrears of pay, holiday pay and notice pay are subject to tax. Statutory redundancy under £30,000 is not taxable.
What are my rights if I am transferred to another company?
This is known as a transfer of undertaking or a TUPE transfer.
Your contract, and your length of service, transfer to the new employer without change, unless you both agree to changes or there is a justifiable, economic, technical, or organisational reason.
Similarly, if the new employer plans to make redundancies, they must be for genuine economic, technical, or organisational reasons and they must follow procedures including consultation and offering.
Quick summary
What are my redundancy rights and entitlements?
Who will pay my unpaid entitlements?
Will I be taxed?
What are my rights if I am transferred to another company?
Get in touch
Margaret Linn
Manager