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If your employer goes into liquidation…

How to make a claim for your lost wages, redundancy pay etc

14 January 2009 – If your employer is legally insolvent then you will be able to make a claim for your lost wages, redundancy pay and other payments relating to your work. Your employer will be legally insolvent if:

– It is a company which has gone into administration, liquidation, receivership or has entered into a voluntary arrangement with its creditors. You can check on the Companies House Website http://www.companieshouse.gov.uk/ to discover the status of your employer, or

-Your employer is an individual then they will be legally insolvent if they have been declared bankrupt or has entered into a voluntary arrangement with his or her creditors. You can check the Individual Insolvency Register www.Insolvency.gov.uk for information on individuals declared bankrupt or who have entered into voluntary arrangements with their creditors. (Please note that there are separate rules for Scotland).

Short-time & lay off

If your employer is not yet legally insolvent then they may cut the number of hours you work (sometimes called 'short time') or lay you off, which is usually where your employer asks you not to come into work. If you are laid off then you should normally still be paid unless there are clauses to the contrary in your contract of employment or you have agreed that you won't be paid.

If you are laid off then you will be paid the Statutory Guarantee Pay (SGP) minimum, a five day payment of a maximum of £20.40 per day once in any three month rolling period. You may also be entitled to claim benefits so contact your local job centre if you are laid off. If you are not paid SGP or wages which you are entitled to then you may be entitled to bring a claim against your employer in an Employment Tribunal for deductions from wages.

To do this you must apply to the Employment Tribunal within 3 months of the date you failed to receive the payment. However, there is no guarantee that an employer will pay you so you may want to petition them to wind up the business and claim part of your unpaid wages from the Redundancy Payments Office ("RPO") as outlined below.

Transferring or buy out of an insolvent business

Your employer may also try and sell the business even though you have been put on short time or laid off. If you decide to carry on working for your employer and it is transferred to another business then your contract of employment will be protected under the Transfer of Undertakings (Protection of Employment) Regulations 2006. Once the business has been transferred then your new employer will pay your wages.

SEE What happens to me if my employer goes into liquidation?

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

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