If your employer becomes insolvent, you have a number of options open to you. This article gives details of what to do if you're owed money by an insolvent employer and how insolvency affects your employment status.
Insolvency is where an employer has no money to pay the people they owe in full and they have to make special arrangements to try to meet these debts. Usually an insolvency practitioner or official receiver is appointed to deal with the insolvency.
There are different names for different types of insolvency, and for the people who handle them:
The insolvency practitioner will normally send you the necessary forms for claiming any money you are owed. If this doesn't happen, write to the insolvency practitioner setting out your claims. They should tell you how to claim payments from the Redundancy Payments Office and HM Revenue and Customs (HMRC).
If you don't know who the insolvency practitioner is, see 'What to do next' and 'Where to get help' below.
There is no guarantee in an insolvency that all the debts can be met in full. That is why there are special arrangements to ensure that you receive a basic minimum of the debts owed from the National Insurance Fund.
The Insolvency Service's Redundancy Payments Offices are responsible for paying the following claims:
Debts of pay remaining after payment from the National Insurance Fund may become payable only if sufficient funds are realised from the company's assets.
Some debts, including holiday pay and wages (up to four months' pay or £800, whichever is less), will be a 'preferential debt' when the assets of your employer are shared out – meaning that they must be paid before certain other debts.
'Pay' includes commission, overtime and guarantee payments. It also includes statutory payments for time off work, or suspension for medical or maternity reasons.
Holiday pay and wages are worked out up to the date of insolvency. Redundancy and notice pay are worked out from either the date your employer became formally insolvent or when your employment ended – whichever is later.
If you and other employees have been paying into a pension scheme at work, the pension fund trustees can apply to the Secretary of State for some of your employer's unpaid contributions to be paid into the scheme.
If your employer's insolvent and makes you redundant, you may be able to claim a statutory redundancy payment, provided you do so within six months of being dismissed.
For more information, see our '' section.
Even if your employer can't pay you, they might want you to carry on working for them while they try to sell the business. If you decide to stay on and they're successful, the law protects your contract of employment, including any pay that's owed to you.
If you continue working and your employer's business is transferred, the new owner takes over the obligation to pay what is owed to you.
It's possible your employer isn't officially insolvent but still can't pay you. In this case, they may be forced to lay you off or put you on short time.
Sometimes the insolvency practitioner may keep the business running if, for example, there is a chance that all or some of the business can be made workable or be sold on to a new owner. If this happens you may be asked to continue working. Your rights to a redundancy payment are not affected if the firm closes down later.
If the business you work for has closed, you need to find out if your employer's insolvent or just in difficulty. Companies House holds trading details on its register of companies, and you can get information on people who are declared bankrupt from the Insolvency Service.
If the company's still trading but you are not getting paid, you may be able to complain to an Industrial Tribunal that there's been an unlawful deduction from your pay.
If you dispute the amount of payment made from the National Insurance Fund, you can take the matter to an Industrial Tribunal.
For general enquiries about insolvency, call the.