This article is divided into Eight Parts for easier reading:
- Part 01: Background.
- Part 02: Redundancy Pay and Taxes.
- Part 03: Redundancy and Consultation.
- Part 04: Suitable Alternative Work and Finding Other Work.
- Part 05: Redundancy and Other Factors.
- Part 06: Redundancy and Insolvency.
- Part 07: Directors.
- Part 08: Miscellaneous.
Part 06: Redundancy and Insolvency
If your employer is insolvent and cannot pay the redundancy payment then you are entitled to claim the SRP, as well as certain other unpaid sums, from the state out of the National Insurance Fund.
You will have different rights depending on whether your employer:
- Makes you redundant;
- Asks you to keep working; or
- Transfers you to a new employer (if the business has been sold).
Your employer must have a consultation about why redundancies are happening and if there are any alternatives, although they do not have to consult you directly.
6.1 What if I am Made Redundant?
You are made redundant if you are dismissed from your job, and the individual who is dealing with the insolvency (the ‘insolvency practitioner’ or ‘official receiver’) must tell you how your job is affected and what to do next.
They will also give you a:
- RP1 fact sheet; and
- ‘CN’ (case reference) number to use when you apply for money you are owed (cannot claim without this).
You can apply to the government for:
- A redundancy payment;
- Holiday pay;
- Outstanding payments like unpaid wages, overtime and commission; and
- Money you would have earned working your notice period (‘statutory notice pay’).
It is important to note that a company can go through more than one insolvency. You cannot claim outstanding payments between the day of the first insolvency and the day you were dismissed, even if you did not know about the previous insolvency.
You can also apply to court for compensation if you think you were dismissed unfairly or not consulted properly.
6.2 What if I Believe I was Dismissed Unfairly?
You can make a claim to an employment tribunal if:
- You were dismissed unfairly (‘basic award’).
- There was not a consultation about your redundancy (‘protective award’).
You will be claiming against the Secretary of State for BEIS and your former employer (‘the respondents’).
6.3 What if I Continue Working after the Insolvency?
- You might be asked to continue working for your employer after they become insolvent.
- You will still be eligible to claim for redundancy pay and other money you are owed if you are made redundant at a later date.
- You cannot claim holiday pay, wages, bonuses or commission that you are owed between the day of the insolvency and the day you were dismissed.
6.4 What if I am Transferred to a New Employer?
- You cannot claim any money from the government if you were transferred before your former employer became insolvent.
- If you were transferred afterwards, you can apply for redundancy pay, statutory notice pay and outstanding payments such holiday pay, wages, commission and bonuses.
6.5 What Redundancy Pay Will I Receive?
The same principles apply as outlined in Section 2.11.
Other money you may be able to claim includes:
- Wages and Other Money You are Owed:
- You can apply for unpaid wages and other money you are owed by your employer, for example bonuses, overtime and commission.
- You are only entitled to money that is in your employment contract.
- You will get up to 8 weeks of money you are owed. It counts as a week even if you are only owed money for a few days. For example, if you are owed £30 of overtime per week for the last 10 weeks, you will get £240 (£30 x 8 weeks).
- Payments for wages and other money you are owed are capped at the same rate as redundancy pay.
- You pay income tax and NI when you get unpaid wages and other money you are owed.
- You might be able to claim a tax refund if you have paid too much.
- Holiday Pay:
- You can get paid for:
- Holiday days owed that you did not take (‘holiday pay accrued’); and
- Holiday days you took but were not paid for (‘holiday pay taken’).
- You are only paid for holidays you took or accrued in the 12 months before your employer became insolvent.
- You will only get payments for up to 6 weeks of holiday days. Holiday pay is capped at the same rate as redundancy pay.
- You pay income tax and NI on your holiday payment.
- You might be able to claim a tax refund if you have paid too much.
- Statutory Notice Pay:
- You are entitled to a paid notice period when you are made redundant, even if it is not in your contract.
- You can claim for statutory notice pay if you:
- Did not work a notice period;
- Worked some of your notice period; or
- Worked an unpaid notice period.
- Your statutory notice pay is worked out as one week’s notice for every year you were employed, up to a maximum of twelve (12) weeks.
- Payments are capped at the same rate as redundancy pay.
- Pension Contributions:
- Contact the insolvency practitioner or official receiver if you are missing contributions to your pension.
6.6 How Do I Apply for Money I Am Owed?
- You can apply as soon as you have been made redundant.
- The person dealing with the insolvency (the ‘insolvency practitioner’ or ‘official receiver’) will give you a ‘CN’ (case reference) number.
- You cannot claim without the CN number.
- You are eligible to apply if:
- You were an employee; or
- You are a UK or EEA national (or a foreign national with permission to work in the UK).
- If you are not eligible (for example you are a contractor) register as a creditor instead.
- You must apply for redundancy, unpaid wages and holiday within 6 months of being dismissed.
- You request to claim for loss of notice pay (‘statutory notice pay’) in your application.
- Choosing ‘Yes’ does not mean you have applied.
- If you requested to claim statutory notice pay, you will get sent a letter telling you when you can apply.
- You need an ‘LN’ reference number to make a claim.
- It will be sent after your notice period would have ended.
- This is usually no more than 12 weeks after you are dismissed.
- You must apply for redundancy first – even if you are not owed any money.
- Employees at the same business can have different notice periods.
- Once you have the LN reference number, claim online for loss of notice.
- Money you get (or could have got) by claiming benefits will be deducted from your payment.
Details you will need include:
- A ‘CN’ number.
- Your NI number.
- An email address.
- Your bank or building society details (so you can get paid).
- The date you became redundant (if you lost your job) – this can be found on your official letter of redundancy.
- Your employment details, including dates you were employed and how much you were paid.
- Details of any money you are owed by your employer.
- The number of holiday days you are entitled to and holiday days you have taken.
- Copies of any letters sent to or received from your employer or an employment tribunal.
- Details of any money you still owe your employer.
If you have an enquiry or need help with the various forms, contact the Redundancy Payments Service @ firstname.lastname@example.org. You will need your CN number and NI number.
6.7 What Happens After I Have Applied?
- It usually takes up to 6 weeks to get your payment but can take longer.
- Your information will be checked against the employer’s records, for example how much holiday you had accrued.
- You will only get a payment if the records show you are owed money.
- Any benefits you are eligible to claim will be deducted from your statutory notice payment (even if you did not claim them).
- If your application is rejected contact the Redundancy Payments Service in the first instance who will explain why it was rejected.
- If you disagree with the decision you can make a claim to an employment tribunal.
- You will be claiming against the Secretary of State for BEIS and your former employer (‘the respondents’).
- You can also get help finding a new job:
- Contact your local Jobcentre Plus and ask for their Rapid Response Service for help finding a new job.
- You will be able to use the service for up to 13 weeks after you are made redundant.
- You must have started your notice period to be eligible.