Unfortunately, for many employees when a company goes into liquidation, information can be scarce or last minute and there can be too much uncertainty.
We talk through some of the financial aspects here in our redundancy in liquidation guide. What you will be entitled to claim for, how to do it and the associated timescales of the processes.
If you have been made redundant by a recently liquidated, or soon to be liquidated company, and don’t yet have a new job lined up, you should take your redundancy letter and register with the Job Centre as soon as possible so you can begin claiming any benefits that you are entitled to.
Once the company has officially entered liquidation you can make a claim for monies owed to you through the liquidator. You should hear directly from the liquidator, however if you don’t, and you’re not sure who the liquidator is then you can search at Companies House to find out.
The liquidator will provide you with a case reference, and using this reference you will fill in an online claim form, an RP1 form. Once the form is processed, your payment will be made by the Redundancy Payments Office (RPO), which should be within 3-6 weeks of the RPO receiving the form.
How much you are owed depends on how long you have worked for the company, and the hours that you have worked. There is no guarantee that all claims can be paid in full, but a basic minimum of the money owed will be paid by the government’s national insurance fund through the RPO. The maximum amount that the RPO can pay is currently set at £538 per week for the tax year starting in April 2020 (for the tax year beginning 6 April 2019, the rate was £525).
You can claim for holiday pay owed, whether this is for days not yet taken, or for holidays that you have taken but haven’t yet been paid for. This can be for up to 6 weeks’ holiday pay, based on your weekly wage rate, and the RPO will pay this at a maximum of £538 per week. Tax and national insurance will be deducted before you receive the payment.
Arrears of Pay
You are entitled to up to 8 weeks arrears of pay, based on your weekly salary rate. The RPO will pay a maximum of £538 per week although tax and national insurance will be deducted before you receive the payment.
Pay in lieu of notice
In normal circumstances you should be given notice by an employer that you are to be made redundant, however this is often not possible in the event of a liquidation. Alternatively, you may have worked your notice period but not been paid for it. As a result you may be able to claim pay in lieu of notice.
After one month’s employment you are entitled to one week’s notice, two weeks’ notice after two years, reaching a maximum of 12 weeks after 12 years employment.
Any state benefits you are entitled to receive, such as Job Seekers Allowance, will be deducted from this figure whether or not you claim them. Therefore it is important that you make a claim for these. Also, if you find another job during the periods that redundancy is being claimed, these wages will be deducted from your claim.
As with holiday pay and arrears of pay, pay in lieu of notice will have tax and national insurance deducted before you receive any payment. However with notice pay, tax deducted is a notional amount taken from the total amount due – if the net figure due is above the weekly cap (currently £525 per week), then you will receive the maximum £538 per week.
If you have worked for your employer for more than two years you should be entitled to redundancy pay.
The amount you can claim depends on how long you have worked for your employer, your age and your weekly pay.
The RPO will pay out up to £538 per week and for a maximum of 20 years. This is tax free up to £30,000.
Unpaid pension contributions
If your employer stopped making payments into your occupational pension scheme the RPS will pay in any money deducted from wages for this purpose, but not actually paid into the scheme. This is limited to the 12 months prior to liquidation.
They will also pay whichever is the lower of the employer’s unpaid contribution or 10% of your wage, both of which are limited to the 12 months before liquidation.
If you still have questions about your entitlement to redundancy in insolvency, there is a detailed fact sheet provided by the insolvency service.