A Guide for Emloyees & Directors – 15.09.2018
Redundancy in Liquidation
An employee that has been made redundant by a recently liquidated, or soon to be liquidated company, who does not have a new job lined up, you should take their redundancy letter and register with the Job Centre as soon as possible, so they can begin claiming any benefits that they are entitled to. If they decide not to claim benefits, then they may lose out because notional benefits will be deducted from their claim for notice pay whether they actually claimed them or not.
How to claim redundancy in liquidation
Once the company has officially entered liquidation employees can make a claim for monies owed to them through the liquidator. They should hear directly from the liquidator who will provide them with a case number reference, and using this number they will be able to fill in an online claim form, an RP1 form. Once the form is processed by the Redundancy Payments Service (“RPS”), payment will be made from the National Insurance Fund. From the date of submission, RPS advise that a straightforward Redundancy Claim with no complications will usually take between 3-6 weeks to be completed and paid out.
My employer is in liquidation – how much will I be paid and will I get paid all the money owed to me?
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 will be paid in full, but a basic minimum amount of the money owed will be paid by the Government’s National Insurance Fund through the RPS. The maximum amount that the RPS can pay is currently set at £508 per week for the tax year starting in April 2018.
What statutory entitlements can I claim for following the liquidation?
- Holiday Pay
- Arrears of pay
- Pay in Lieu of Notice
- Redundancy Pay
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 £508 per week. Tax and national insurance will be deducted before you receive the payment at a total notional rate of 28%.
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 £508 per week although tax and national insurance will be deducted before you receive the payment at 28%.
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 Jobseekers 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 period that notice pay is being claimed, any wages received 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 £508 per week), then you will receive the maximum £508 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.
- Each complete year aged 18-22 (under 22) means you receive half a week’s wage
- Each complete year aged 22-40 (under 41) means you receive 1 weeks’ wage
- Each complete year aged 41-64 means you receive 1.5 weeks wage
- The RPO will pay out up to £508 per week and for a maximum of 20 weeks. This is tax free up to £30,000.
Are directors entitled to redundancy?
- A director will be eligible to claim in the following circumstances.
- They were on the company payroll and paid a regular wage or salary via PAYE.
- They can produce written evidence of their contract of employment and a statement of the main terms & conditions of their employment with the company.
- They have a letter of appointment and a written memorandum giving the terms & conditions of their contract as an employee as required by the Companies Act 1985.
- They had executive duties as a director and were in regular attendance at the company’s premises.
- They can produce their last 3 P60’s (where the company traded for more than 3 years).
- They can produce their last 3 payslips.
- They can produce a P45.
- They can provide details of any dividends taken and expenses drawn in the past 3 years (or shorter where applicable).
- They DO NOT owe the company any money via an overdrawn directors loan account.
- Transfer of Undertakings Regulations (TUPE) DO NOT apply.
Where is TUPE likely to apply?
Often directors will set up a new company to carry on the business of the old one after it has been liquidated. Where this happens pre-liquidation, then RPS may deem that TUPE applies and the directors (and any other employees transferred to the new company) will be ineligible to claim redundancy and other benefits. Instead their employment with the new company will be deemed to be continuous, and employee rights to unpaid wages, holiday pay, redundancy and other contractual benefits will transfer with them.