If your employer is insolvent and enters Liquidation, Administration or a Company Voluntary Arrangement (CVA), it will probably have an impact on your employment status. Your first concerns are likely to be around whether you still have a job, whether you will still be paid and how to make sure your rights are protected.

The first thing to have in mind is that all employees have special rights. If your employer is unable to pay you because they have become insolvent, then you are entitled to make a claim on the National Insurance Fund (NIF) – a process administered by the Insolvency Service’s redundancy payments office.

Despite the name, the office doesn’t simply deal with redundancy payments or only with those cases where you no longer have a job, it deals with any claims relating to your financial entitlements when your employer becomes insolvent and is unable to pay you.

There are many types of insolvency in addition to the most common ones stated above. Whatever the insolvency, depending on your situation, you can apply to the Government through the Insolvency Service redundancy payments office for:

  • A redundancy payment (If you have at least 2 years’ service)
  • Accrued, unpaid holiday pay
  • Outstanding regular payments such as wages, overtime or commission
  • Money that you would have earned if you had been given proper notice (Statutory Notice Pay)

IMPORTANT:  In addition, if you lose your job you may also be eligible for unemployment benefits. In fact, if you do not apply for benefits when you lose your job it is likely that you’ll receive less statutory notice pay because any benefits that you are entitled to will be deducted from your statutory notice pay, whether you have claimed them or not. This surprises some employees who may not have experienced losing their jobs before, but it is extremely important that you register immediately with your local Job Centre to make sure that you have this covered. You can make a claim through them for your benefits, such as Job Seekers Allowance or Universal Credit.

Not all insolvencies necessarily result in you losing your job. It will usually be clear in each case, especially if a Licensed Insolvency Practitioner is involved in the process, but in some situations you may be asked to carry on working or your employment may be transferred to a new employer.  However, even if you don’t lose your job, you may still have arrears of wages, overtime, commission or accrued holiday pay that you will need to claim through the Insolvency Service redundancy payments office.

The Licensed Insolvency Practitioner that is dealing with your employer’s insolvency cannot advise you personally, but they will usually be able to give you some guidance and may direct you to local agencies such as the Job Centre or Citizens Advice Bureau where you can get more support.  However, if you are likely to be entitled to make a claim through the Insolvency Service you will be supplied with details of the process.

The process of making a claim for the payments that you should have had from your insolvent employer involves an online application. Each case has a dedicated reference and the Licensed Insolvency Practitioner that is appointed will contact you with the reference and a factsheet containing some guidance.

Guidance issued by the Insolvency Service states that they endeavour to process claims and make any payments that are due within 6 to 8 weeks from the date when you make your claim. Claims cannot be made until a formal insolvency appointment occurs and, because you may lose your job before that happens, it can seem like a very long time to wait. The Licensed Insolvency Practitioner doesn’t have any control over this and sometimes the actual wait is much shorter. Unfortunately, it often depends upon the time of year and how busy the Insolvency Service is when you make your claim.

If you have lost your job and you are concerned about being able to make regular payments to your mortgage company or other lenders, it is a good idea to call them and explain your position before you get into arrears.  Commercial lenders are very understanding of your situation and will often allow you to take either payment holidays or to move on to interest-only repayments until you have had chance to get back on your feet.

If you are worried about personal debt, you may find the guidance in the leaflet produced by our industry body, R3 useful. A copy can be downloaded here.

Finally, if you want to find other information on this subject, we recommend that you try the following link to the Insolvency Service’s website.