You’re Fired! Know Your Rights If Your Employer Is Insolvent


Having your employer go into liquidation or administration is something that no employee wants to happen. Usually it’s the fear of the unknown in these circumstances, and that’s normal, but it’s also incredibly important, more than ever, to know exactly what your rights are and what you’re entitled to claim. 

Before we go any further, let’s just have a quick recap of the two most frequently used forms of insolvency that you’re likely to encounter as an employee, namely Liquidation and Administration, and how this effects your position. If your employer is being liquidated, you will no longer have a job because they have already decided that the company cannot be saved. In this case, you’ll be eligible for certain types of employee claims that we’ll discuss in more detail later in this article. However, if the company is in administration this means that an insolvency practitioner has been brought in to see if there’s anything that can be done to rescue or sell the business. It’s worth making the point here that if the business is sold, your employment rights are protected and are passed onto the purchaser of the business.

Therefore, whilst on the face of it Administration may seem to be better because you’re not immediately out of a job, it also means that you won’t yet have rights to make any immediate claims because there’s still a chance that the business will be saved. Typically, if your employer has gone into administration, you will know within 14 days what the likely prospects are for the business and therefore whether your employment will continue. The purpose of this article is to make you, the employee of an insolvent business, aware of the types of claims that you can make and what the current limits are for such claims.

1) Arrears of Pay

What this means is that as an employee of an insolvent company, you can claim up to eight weeks’ arrears of pay. This includes your wages and any commissions that you may have been due had the company not become insolvent. This is capped at a £479 per week*, so whilst it’s better than nothing it may still not be the full amount owed.

2) Holiday Pay

You are also eligible to file a claim for up to six weeks’ holiday pay. This will vary depending on what type of employee contract you have (part time or full time), how much holiday you were due at the start of the holiday year, how far through the holiday year you are and how much you have taken to date.

3) Statutory Notice Pay

You can also claim statutory notice pay, which again will vary depending how long you have been with the company (up to a maximum of 12 weeks). You get one week after one month’s service going up to one week per year of service (after you’ve been with your employer for more than two years).

4) Redundancy Pay

You can claim Redundancy Pay only if you’ve been with your employer for 2 years or more. This is also capped at £479 per week and how much you receive will depend on how long you have been with the company, your weekly pay at the time of calculation and your current age at the calculating date. If you’d like to calculate your statutory redundancy pay yourself then the government has provided a free calculator here.

Please note other things that you may be able to claim for will be sick pay, maternity pay, overtime payments, and protective awards. Knowing your rights as an employee of a company that is in insolvency is crucial.

Kingsland Business Recovery are insolvency experts. For more information on your rights as an employee in insolvency, please feel free to contact one of our directors on 0800 955 3595 for a no obligation, confidential chat. Or alternatively, drop us an email at info@kingslandbr.co.uk.

*limit quoted as at 11 November 2016.

Experienced in all areas of corporate and personal insolvency

Combined experience of over 30 years in all areas of corporate and personal insolvency. Read more...

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