Redundancy - Employee Entitlements

What are employees eligible to claim for?

When an employee is made redundant, they are entitled to make a claim for what they are owed from The Insolvency Service (a government agency) out of the National Insurance Fund. Normally, the employer would pay employees, however, because the employer has gone insolvent, employees can apply to The Redundancy Payments Service which is a department of The Insolvency Service that steps in and says, "we will pay you" instead. Furthermore, rather than waiting for the liquidator or administrator to sell assets to pay back to employees - employees' claims will be processed on the date of liquidation or administration.

Types of Claims

• Arrears of Pay - for example, unpaid wages, overtime, bonuses and commission.
• Holiday Pay – any unused leave you were entitled to take between the start of your leave year and the date of insolvency and any holiday you’ve taken but not been paid for.
• Redundancy Pay – if you’ve worked for your employer for at least 2 years, you are entitled to claim for redundancy.
• Pay in Lieu – With immediate termination of your employment contact, you are entitled to claim for pay in lieu of notice, subject to working for your employee for at least 1 month.

The above types of claims are subject to certain limits, including a statutory maximum weekly rate of ￡544, however, this does tend to fluctuate each year.

Further information about the different types of payments and the deductions the Redundancy Payments Service must make on any money employees are owed, is available on GOV.UK: https://www.gov.uk/insolvency-service/your-redundancy-payment

If employees are owed more than the Insolvency Service can pay, they can register as a creditor in the insolvency event. Employees' claims will be considered preferential or unsecured in the liquidation or administration, but this has no effect on the Redundancy Payments Service making payments to the employees.

Preferential Claims

Employees' claims will be considered preferential for unpaid wages/salary, holiday pay and related employment rights for up to the last four months, or ￡800 wages/salary can be claimed as preferential, whichever is the lesser amount. The four months are calculated by counting back from the ‘relevant date.’ All holiday is preferential.

Unsecured Claims

Redundancy Pay and Notice Pay are unsecured.

For more information on how to register as a creditor, please contact the relevant insolvency practitioner who has been appointed to handle the case.