Retailers Maplin, Toys “R” Us (UK) and Betterware have entered into insolvency processes this year leaving thousands of jobs respectively at risk. In such uncertain times, what rights do affected employees have? Even if you are aware of your employer’s financial situation, it can still come as quite a shock if your employer tells you that they are insolvent. It is crucial to note that you have rights and that you can make a claim for the money that you are owed. This article will provide you with information on the steps you can take if your employer becomes insolvent. If you or anyone close to you has been faced with this position, please call us on 0141 566 7038 for further help and advice.
What does Insolvency Mean?
Put simply, your employer will become insolvent if it cannot afford to pay its debts. If your employer is an individual, the type of insolvency is called Sequestration (The Scottish term for Bankruptcy). There are other types of insolvency:
- Liquidation: Your employer will close the business and its assets will be sold in order to pay money to creditors.
- Administration: Your employer will ask an administrator to come in and try to keep the company running.
- Voluntary Arrangement: Your employer agrees on an arrangement with the people it owes money to (creditors).
What can I claim?
Under the Employment Rights Act 1996, the secretary of State must pay to employee’s funds that are owed to them by their insolvent employer. The Redundancy Payment Service (RPS) was established to provide a way in which ex-employees would receive some of the payments they are due in a much shorter time scale that if they had to wait for the assets of an employer to be realised before payments can be made. These payments are made from the National Insurance Fund are subject to the statutory weekly limit of £508. It is not guaranteed that you will get everything your employer owes you, but you can make a claim for the following from the RPS:
Statutory Notice Pay
If you do not work your full notice to get notice from your employer, you can claim for your statutory notice pay only. Any contractual notice should be claimed separately in the insolvency proceedings You will be entitled to 1 weeks’ notice after 1 month’s service, 2 weeks after 2 years’ service, then 1 week for every completed year you have worked. The statutory maximum period you can claim from the RPS is 12 weeks. The part of the notice in which you have worked but not have been paid is paid like wages, capped at the statutory limit and subject to tax and national insurance. You must do everything you can to mitigate your loss by claiming any state benefits and allowances you are entitled to and this will be deducted from your claim.
You must have 2 years’ continuous service with your employer to qualify for statutory redundancy pay. The number of weeks used to calculate your redundancy payment will depend on your age and length of service but it is capped at 30 weeks. Redundancy pay under £30k is not taxed or liable to national insurance.
Wages Owed (Arrears of Wages)
You can claim up to a maximum of 8 weeks’ unpaid wages from the RPS Income tax and national insurance at the basic rate are deducted from this amount.
The RPS will pay outstanding holiday for up to 6 weeks, again subject to the statutory limit accrued within a 12-month period. Income tax and national insurance at the basic rate are deducted from this amount.
The RPS will pay 12 months’ employee contributions
Benefits in kind
The RPS will not pay for these unpaid benefits.
Where to make a claim
You can make your claim on the government’s website: www.gov.uk/claim-redundancy Please note that you can only claim for statutory notice pay once your notice period has ended.
How to make a claim
The Insolvency Practitioner will give you a case reference number. You will need this along with your National Insurance Number, email address and bank details. It will also be useful to have documents which detail how much money your employer owes you and an official letter of redundancy (if you have received one). You can contact the Insolvency Service if you require any further assistance.
What about Statutory Sick Pay etc.?
HM Revenue and Customs (HMRC) will pay you for:
- Statutory sick pay;
- Maternity leave pay;
- Paternity leave pay;
- Adoption leave pay.
Occasionally, an employee will owe money to their insolvent employer. If this is the case, the expenses owed will be off-set against the employee’s entitlement to claim money back. If you owe expenses to your employer, for example for additional holidays, you should provide as much information as you can to the Redundancy Payments Office and they will be able to off-set the amount owed against the money that you will be paid.
If your employer becoming insolvent has had a negative impact on your own financial situation, the sooner you get help the better. WB Debtcare can offer you advice and assistance in dealing with your debts. Please call us on 0141 566 7038.