Employees Redundancy Claims in Liquidation

Employees redundancy claims in liquidation?

In a liquidation the Redundancy Payments Service (RPS) will be informed by the liquidator of the staff redundancies either prior to or soon after the liquidation. The liquidator will then be provided a case reference by the RPS, this typically happens within about 2 weeks. This reference number is then forwarded to the employees by the liquidator, alongside an information sheet. Employees can then use this RPS reference number to complete the redundancy claim forms online.

Your RPS entitlement is dependent on 2 factors – age and time working for the business. Generally, you are entitled to a claim for redundancy pay, unpaid wages, statutory notice pay, holiday pay (if applicable) and unpaid pension contributions.

The claims can take anything from 4 to 6 weeks to process depending on how quickly the RPS will deal with the case. In most cases the claims are paid within a maximum of 8 weeks on the basis that the RPS has been provided with all the relevant information by the Liquidator and the employees.

You will not be paid the full amount that is owed to you. Due to the National Insurance fund, there is a limit on how much will be paid out to you. From 6th April 2020, the maximum amount is £538 per week, increasing annually. If you earn over £538 per week, the RPS will pay £538 per week, then the remaining balance owed will be claimed in the liquidation proceedings either as a preferential or unsecured claim in the liquidation.

For example, if you are owed 5 weeks’ wages and earn £750 per week:

TOTAL CLAIM:     £750 x 5 weeks = £3,750

RPS Limit:            £538 x 5 weeks = £2,690

Therefore, you will receive £2,690 (prior to tax and NI), the remaining £1,060 owed will be claimed back from the liquidation. As your employer has gone into liquidation, it is unlikely that the liquidator will realise enough funds to pay all creditors in full. This means, that if you are owed more money than the RPS can pay it is unlikely that you will receive all the money that is owed to you.

If you are paid hourly, then a week’s pay is calculated by taking an average amount of hours worked each week for the 12 weeks prior to your redundancy.

If you have expenses you were planning to claim back from your employer, for instance for milage, train fares then these cannot be claimed. You can add this to your unsecured claim in the liquidation.

Directors of companies can also make claims for redundancy as long as you were an employee of the company you are entitled to make a claim as any other employee. However, as a director, it is likely you will be required to provide evidence of your employee status such as a contract, receiving pay under PAYE scheme.

Next Steps

If you want to find out anything further about this topic then please feel free to call on 0330 236 9930, 0330 236 9938 or 07961 116321. All conversations will be in strict confidence. You can also email vee@navigatebr.com

This article is for information and interest only. It is not a substitute for full professional advice, which will take in to account the specific and individual circumstances. Navigate Business Recovery Limited cannot accept any responsibility for any loss arising as a result of any person or organisation acting or refraining from acting on any information.