Does the Government Provide Support for Employees of Insolvent Companies?

  • One huge advantage of working in the UK is the government Redundancy Payments Service
  • The Redundancy Payment Service can make payments to employees of insolvent companies to make up losses of employees who have not been paid because of the insolvency of their employer
  • Insolvency generally means that the employer has entered a formal insolvency process such as Creditors’ Voluntary Liquidation
  • Calculating payments due can be complicated and is specific to an individual’s circumstances; so, we’ll summarise the position
  • Possible claims include:
    • Wages
    • Holiday pay
    • Pay to replace the warning period of redundancy, that should have been given – known as notice pay
    • Redundancy (requires two years employment for that employer)
  • Any payments made by the Redundancy Payment Service will be capped at the statutory maximum levels
  • Statutory levels may be lower than the amount that an employee is due under their employment contract
  • The statutory maximum payment per week, at the time of writing, is £508 per week for anyone made redundant from the 6th April 2018
  • Claim limits are fully detailed on the government website, here’s a link.
  • An Insolvency Practitioner will help employees of insolvent companies to make any claims
  • In certain circumstances, for example where correct procedure was not followed in giving correct notice by an employer, former employees may have a claim for a protective award
  • A protective award must be upheld by the Employment Tribunal Service
  • A successful protective award claim can then be applied for payment by the Redundancy Payment Service
  • We recommend discussing any possible protective award claim with ACAS the Advisory, Conciliation and Arbitration Service

Insider Tips:

Many company directors who are shareholders have moved to pay a part of their salary by way of a dividend. Only salary payments will count towards any claim against the government scheme.