Employee rights when insolvent

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Employee Rights When A Company Is Insolvent?

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Employee Rights When a Company Is Insolvent?

Within the UK, employment rights when a company is insolvent are dealt with, when an employer commences insolvency.

When this happens, arrangements exist to assist former employees when dismissed directly due to their employer’s insolvency. The UK National Insurance Fund ensures minimum payments. Includes redundancy and different contractual amounts owed. They remain subject to limits and work to ensure approx 80% paid out to former employees within four weeks of a submitted claim. The appointed Insolvency Practitioner actions it.

What Are the Rights And Entitlements Of Employees?

Suppose the insolvent company owes employee money. It would help if you claimed it through the insolvency practitioner. They administer the insolvency. In some instances, i.e., if a company rescue attempted or the business sold, you might be asked to continue working.

Your rights if your employer is insolvent are not changed in any way if the company ceases to trade later. Suppose the business transfers to a third party, your rights as an employee are protected.

Employee Rights When a Company Is Insolvent? – Help for Employees Claim Monies Owed?

Once appointed, the licensed insolvency practitioner, the appointed Liquidator, sends you forms you need to claim. However, only done provided the company may demonstrate you were employed on the PAYE scheme and had outstanding monies to you at the time of the liquidation.

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How can employees claim money owed by an insolvent company?

Upon appointment, the insolvency practitioner (IP) sends all former employees as per the PAYE scheme claim forms (RP1 & RP3) for you to submit your claim.

  • Contact Companies House;
  • Search for Insolvency Notices – The Gazette, here

What can Employees Expect if a Company Closes Down?

However, the National Insurance Fund does not guarantee that employees receive 100% of the amount your former employer owes you. 

You may, though, claim for:-

Outstanding Wages/Salaries

Up to 8 weeks’ wages, including payment if the employer failed to follow ‘collective consultation’ rules

Outstanding Holiday Pay

You may claim a maximum of 6 weeks unpaid holiday pay.

Statutory Notice Pay

Statutory notice pays out up to 12 weeks. It starts at 1 week for a month of service and rises to 1 week for every year.

Statutory Redundancy payments

Statutory Redundancy payments in insolvency remain capped at £508 per week. They are calculated by the length of the employees’ service, salary, and age. The entitlement caps at 20 years of employment, providing:

  • For an employee under 22, – half a week for each completed year.
  • Employees aged between 22 and 41 – One week’s pay for each year.
  • 1 & 1/2 weeks pay for every year the employee was employed with the company from 41.
  • If the employee is 64 and ceases totally from 65 and above. Claims are reduced by 1/12 

Redundancy payments are complicated, so please read the government’s page for updated information here.

Outstanding Pension Contributions

Outstanding contributions by employees are paid for the 12 months before the insolvency. In terms of contributions by employers, the Department for the Economy’s Redundancy Payments Service (RPS) pay the least of:

  • Any contribution unpaid for the 12 months before the insolvency or
  • 10% of the employee’s total wages for the same pre-insolvency period;
  • The amount required for the scheme to fulfil its liability in the event of the company’s dissolution for the payment of benefits, as certified by an actuary

Statutory Maternity pay

Once a limited enters liquidation, HMRC continues to pay statutory maternity pay (SMP).

For further guidance on Maternity Pay, please contact the Statutory Payments Dispute Team on:

  • Telephone – 0300 322 9422
  • Textphone – 0300 200 3212

Opening hours:

8.30 am to 5 pm – Monday to Thursday

8.30 am to 4.30 pm – Friday

Their office is closed at weekends and bank holidays.


Statutory Payment Dispute Team

PT Operations

North East England



United Kingdom

Employee Rights When A Company Is Insolvent – Can Directors claim Redundancy?


Directors subject to paying PAYE and meeting criteria for conduct and not trading whilst insolvent may claim, Redundancy Holiday Pay and Redundan

Employee rights when insolvent
Employee rights when insolvent
Employee rights when insolvent
Employee rights when insolvent
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