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Has your employer been declared insolvent?

Here are the steps to take to claim all the benefits you are entitled to

QUESTION: What happens to me if my employer goes into liquidation?

Pay

If your employer is declared insolvent then an independent insolvency practitioner or Official Receiver will be appointed to deal with the company's business and assets. Once this has happened employees will be able to apply to the Redundancy Payment Office (RPO) for:

– A maximum of 8 weeks' unpaid wages prior to the insolvency. Wages include commission, overtime, SGP, statutory payments such as maternity pay and protective awards. You can select the week most beneficial and the weeks chosen do not have to be consecutive. However, you cannot add unpaid days together to make a whole week

– Up to 6 weeks unpaid/untaken holiday pay you accrued in the 12 month period prior to your employer being declared insolvent

– A total not exceeding 12 weeks' notice pay etc

These payments are all subject to tax (which should be deducted at the basic rate) and will be made from the National Insurance Fund. Keep an eye out for how much tax you have paid as you may be entitled to a refund from the RPO e.g. if you haven't used up your personal allowance. There is no age limit or length of service required to obtain the payment.

However, there are limits on the number of weeks you can claim (as set out above) and also on the weekly rate you can claim. The current limit is £330 per week. You can contact your local RPO office and download the appropriate form http://www.berr.gov.uk/employment/redundancy/red-pay-office/page14404.html

You should try to limit your losses by claiming all of the benefits you are entitled to (you should check as above with your local job centre) and applying for new jobs. Any money you do receive will be taken into account when calculating the payment you are owed. If you do not do this then the payment you receive from the RPO may be reduced. Any debts after payment owed (e.g. weekly wage above £330) from the RPO can only be paid if there are sufficient funds available from the company's assets.

However, for some debts, such as outstanding holiday pay, wages (up to 4 months' pay or £800, whichever is less) and occupational pension contributions employees will be treated as preferential creditors meaning that when your employer’s assets are shared out amongst the creditors the preferential creditors will receive payments ahead of other creditors. There is no qualifying period or age requirement.

You should contact the appointed independent insolvency practitioner or Official Receiver to make a claim. It is unlikely that there will be enough money left for you to get paid what you are owed in full but you may recover some money.

If you are entitled to claim certain types of statutory pay, such as sick pay or paternity pay, beyond the date of insolvency then you may be able to claim these from Her Majesty's Revenue & Customs. Please refer to your job centre for further information.

Pensions

The trustees of the employees' occupational pension scheme may be able to make contributions to the fund from the Secretary of State via the National Insurance Fund subject to certain conditions. In some circumstances the Board of the Pension Protection Fund may take over the running of the scheme and pay compensation.

Redundancy

If you have worked for your employer continuously for over two years then you may be entitled to a statutory redundancy payment. The payment you will receive is based on your weekly wage (capped at £330 but this amount normally increases annually) multiplied by the number of years of service you have and an age factor. Redundancy payments up to £30,000 should be tax free. Click Government's redundancy calculator is available at http://www.berr.gov.uk/employment/employment-legislation/employment-guidance/page33157.html. You can claim your redundancy money from the RPO.

How do I claim?

The insolvency practitioner should send you the appropriate form or you can contact your local RPO by clicking on the links above. 92% of all claims are paid within 6 weeks. Tax will be paid on payments arising from your contract such as wages and holiday pay. You can contact your local RPO to see if you are owed a tax refund. You may also be entitled to a tax refund on other payment so you should also contact your local tax office if you think you have paid too much tax. You should contact the independent insolvency practitioner or Official Receiver to claim the preferential debts and remaining money owed but it may take some time before you receive payment.

This article was written by Rachel Blythe, Solicitor – Employment Team Simpson Millar LLP

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