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At Thomas Westcott Business Recovery, one of the most important initial steps in any Liquidation or Administration is to make sure that employees are looked after as efficiently and empathetically as possible.

You may have just received notification that your employer is soon to be placed into Liquidation or Administration. This is often a time of worry and panic for many. How are you going to pay the mortgage, pay your credit card bill or feed the family? There are a few practical tips you should consider in these circumstances:

 

Has your employment ended?

In some instances, the Insolvency Practitioner (IP) instructed to deal with the company’s affairs may need your employment to continue. There may be work to complete or the business may be able to be saved or sold. The IP should consult with employees at an early stage, but if in doubt, ask!

 

Complete your forms

If you have been given formal notice, you will receive guidance on how to claim for statutory payments from the Redundancy Payments Office (RPO). This is now all completed online. Don’t delay! As soon as you receive your reference number from the IP, complete the online form.

 

What are employees entitled to?

Employees are entitled to various statutory payments from the RPO which are capped at £475 (effective from 06 April 2015). This cap is reviewed annually. Employees may be entitled to the following:

Arrears of wages: Most employees will be paid weekly or monthly. Your claim is limited to 8 weeks which is capped at £475 per week. 

Holiday pay: Employees can claim up to 6 weeks holiday pay in the past 12 months which is capped at £475 per week. It should be noted that the claim to holiday pay is for accrued days only. 

Notice pay: Employees will be able to claim for statutory notice pay, capped at £475 per week. You must have been in continuous employment for over 1 month to be entitled to 1 weeks notice pay; 2 years for 2 weeks notice pay; 3 years for 3 weeks notice pay; and so on up to a maximum of 12 weeks entitlement. Employees should note that any income/benefits received in the notice period will be deducted from the amount the RPO will pay.

Redundancy Pay: If an employee has been continuously working for the insolvency company for at least 2 years, he or she will be entitled to statutory redundancy pay. To calculate your statutory redundancy pay, you can visit https://www.gov.uk/calculate-your-redundancy-pay 

For any claims over and above the weekly limit, or for excess contractual claims, this will form part of your claim against the insolvent company.

 

If I am a director, can I still claim?

Directors can also be treated as an employee and in most circumstances are able to claim for the same entitlements as set out above. The RPO will review this on a case by case basis which will depend on the director’s role within the insolvent company, his/her contract of employment and the way he/she was remunerated by the company, amongst other criteria.

 

Sign-on and get back out there!

It is important that you sign on as soon as possible. Make sure your CV is up to date and start looking for new employment. However, some employees choose not to start any new work until after their notice period has expired due to the possibility that the notice pay will be mitigated, but this is a personal choice.

 

I’m struggling to pay my mortgage/credit cards as a result

In situations where an employee has been redundant due to an insolvency, most banks and credit card companies are actually quite sympathetic. It is important that you speak to your bank manager and/or credit card company at an early stage. They may be able to give you a short holiday period or freeze the interest until you get back on your feet. It is also worth re-visiting if you have payment protection insurance in place.

 

If you are still struggling as a result, pick up the phone and talk to us. We are also highly experienced in dealing with personal insolvency solutions and may be able to assist. 

By Jon Mitchell, Licenced Insolvency Practitioner at Thomas Westcott Business Recovery LLP and highly experienced in business rescue, restructuring and insolvency solutions.