At BRI Business Recovery and Insolvency, we specialise in providing legal advice for companies who are facing insolvency. This includes your employee rights when a company closes down. We have helped countless companies and individuals during these trying times. As an employee, it’s important to understand what your rights are.
What are your employee rights when a company closes down?
If a company is experiencing financial difficulty, the board of directors will often consider what steps can be taken to reduce its operating costs. This can include directors taking steps to consult with employees in order to talk about the changes they’re proposing and about the potential risk of redundancies. They must explain why redundancies are being considered and whether there are any alternatives. You may make suggestions on how redundancies could be reduced or avoided altogether. The specific steps a company must take when consulting with their employees are dependent on UK employment legislation and any additional rights stated in the employment contracts.
Employee rights if a company goes into liquidation or Administration
When a company goes into an insolvency process, any employees are entitled to claim monies owed to them by the Company from the Redundancy Payments Service (RPS). If BRI Business Recovery and Insolvency are assisting with the insolvency process, we would let you, as an employee, know how your job is affected, the claims you can make with the RPS and what steps to take.
How to make your claim if the company you work for closes down
As is the case in all insolvencies, BRI Business Recovery and Insolvency can only apply for a case reference number from the RPS no more than 7 days prior to the date of liquidation. Following liquidation, the reference number will then be provided to all employees, together with a factsheet with instructions on how to make your online claim. You will not be able to submit a claim prior to the date of insolvency, as any claims received won’t be processed.
Have your national insurance number to hand when making your claim and your employment details that relate to the claim.
I have been made redundant; what am I entitled to claim?
If the company closes down and you are made redundant, you may be entitled to a number of claim monies owed to them by the Company.
Unpaid wages/overtime and commission
You may claim up to 8 weeks of unpaid wages, which is currently capped at a maximum of £700 per week based on your average weekly pay. You may also apply for unpaid bonuses, overtime and commission which are owed. It is possible that they may not be in the contract, but it could still be a viable claim.
Please note that most elements of your claim will be subject to income tax and national insurance.
Holiday pay
When a company closes down, as an employee, you can make a claim for the following:
- accrued holidays not taken
- holidays that were taken but not paid for
You only get payments for up to 6 weeks of holiday pay which are currently capped at £700 per week and you are only paid for holidays taken or accrued in the 12 month period prior to insolvency.
Redundancy pay
In order to claim for redundancy pay, you must have been continuously employed by the company for 2 years or more before they closed down. The amount you are entitled to is calculated as follows:
- half a week’s pay for each full year you were employed and under 22 years old
- one week’s pay for each full year you were employed and between 22 and 40 years old
- one and a half week’s pay for each full year you were employed and 41 or older
Redundancy payments are currently capped at £700 a week for a maximum period of 20 years of employment, and you must make your redundancy claim within 6 months of dismissal.
Statutory notice pay
A claim can be made for notice pay if you:
- did not work your notice period
- worked part of your notice period
- worked an unpaid notice period
Notice pay is worked out as one week’s notice for each year of employment, up to a maximum of 12 weeks. Note that payments are currently capped at £700 per week.
When making your online claim, the application will ask if you wish to make a claim for statutory notice pay. When selecting the ‘yes’ option, you will be provided with a second reference number which begins with the letters ‘LN’ after your notice period has ended.
After making your employee claim when a company closes down
The Redundancy Payments Service can take up to 6 weeks to process and pay your claim. The information you provide will be checked against the employer records, and you’ll only receive payment if the claim matches the employer records.
If your application is rejected, please contact the Redundancy Payments Service, and they’ll explain the reasons for this. Their contact details are:
redundancypaymentsonline@insolvency.gov.uk
Telephone: 0330 331 0020
If you are concerned about your employee rights when a company closes down and wish to speak with any of the experienced management team at BRI Business Recovery and Insolvency, please contact us. All discussions are in confidence, without obligation and free of charge.