A guide, not advice. This explains how things generally work. A licensed insolvency practitioner will tell you what applies to your company or to you.
Employee Redundancy and the Redundancy Payments Service
When a company goes into liquidation, its employees are made redundant - but they do not lose everything. Most statutory employment entitlements are paid by the Redundancy Payments Service (RPS), a government body funded by the National Insurance Fund.
This means employees can usually recover what they are owed even where the insolvent company has no money.
What the RPS Pays
The RPS can pay:
- Unpaid wages - up to a statutory limit, for the period before the insolvency
- Holiday pay - for accrued but untaken holiday, up to a limit
- Notice pay - pay in lieu of the notice period the employee was entitled to
- Statutory redundancy pay - based on age, length of service, and weekly pay
- Protective awards - in certain cases where collective consultation rules were not followed
There are caps on amounts and certain limits. Entitlements above the statutory limits may rank as unsecured claims in the liquidation, but recovery is uncertain.
How Employees Claim
- The liquidator provides the necessary paperwork - confirming the employment, the amounts owed, and the date of insolvency.
- The employee completes a claim to the RPS (form RP1 for redundancy and related claims).
- The RPS assesses the claim and pays the statutory entitlements, usually within a few weeks to a few months.
What Directors Should Do
- Inform employees promptly and honestly when liquidation is confirmed
- Provide the liquidator with accurate payroll and employment records
- Direct employees to the RPS for their claims
- Remember you may be entitled too - if you are on the payroll with two years' service
Directors' Own Claims
Many directors don't realise that, if they are also employees on the payroll with at least two years' service, they can claim redundancy, notice pay, and holiday pay from the RPS, just like any other employee. For many directors, this entitlement is significant and can even fund the cost of the liquidation.
Speak to a Licensed IP
Our Manchester-based practitioners will guide you and your employees through the redundancy claims process compassionately and clearly. Call us for advice.