What do you do if your employer goes bust?
We’ve got some helpful advice for you if you are facing the worrying prospect of not being paid because your employer has gone out of business. This simple, straightforward guide summarizes what you can do to ensure that you are compensated for work you have done.
We’ve divided things up into three areas based on the type of financial strife your workplace is experiencing. But please be advised this is only guidance. For comprehensive help take a look at the links at the end of this blog.
A business that goes into administration may be saved by transfer, in part or whole, to a new buyer.
Administrators have 14 days following their appointment to decide if employees will be dismissed.
If they choose to dismiss employees within the 14 day period, the former employees become “ordinary creditors” and have to get in line for payment along with other suppliers and creditors.
If they choose to retain the employees beyond the 14 day period, the employees become “preferential creditors”, which means they are more likely to receive outstanding salary or redundancy payments.
Once a buyer has acquired the business, employees will be transferred to the new owner. In this case employees rights are protected under the Transfer of Undertaking (Protection from Employment) Regulations. It will include your continuity of employment and any payments owed.
Once made redundant there is no transfer of terms and there is no continuity of employment even if rehired by the new owner.
To claim Statutory Redundancy Pay you must meet one of these conditions:
- Continuous employment for two or more years with your employer
- Apply in writing to your employer or an employment tribunal within 6 months of your job ending
Claim by filling out form RP1, which you can get by calling the redundancy payments enquiry line.
Telephone: 0330 331 0020
Monday to Friday 9am to 5pm
Find out about call charges
Find out more by reading the redundancy payments factsheet.
A business becomes insolvent when it is declared bankrupt. Employees in this scenario will be made redundant. However an insolvent business maybe unable to make any redundancy payments so in this case you can claim payments from the National Insurance fund.
Also note the terms stated in the Insolvency Act 1986. It states that only preferential creditors are entitled to their outstanding salary (including commission) for the four month period preceding the insolvency and up to £800. This also includes accrued holiday pay (up to six weeks) and certain occupational pension payments. Additional monies owed including payments related to periods longer than four months are classed as ordinary debt.
The business stops and you will no longer have a job.
The National Insurance Fund (NIF)
To qualify for NIF payments your employer must be insolvent and your employment terminated.
Before making an application you must have done everything you can to get your payment, this includes writing to your insolvent employer within six months of your end employment date to ask for payment.
NIF claims have limits:
- There’s a cap of £430 a week for unpaid salary up to a maximum of 8 weeks.
- Up to 6 weeks holiday pay to a maximum of £800.
- Outstanding statutory notice up to a maximum of £430 a week.
- The statutory minimum notice is one week for every year worked, up to 12 weeks.