Your employee rights if your company goes into liquidation

There's a range of options for employees that are dismissed as a result of their employer liquidising the business.

If your company is going into liquidation, you may be left feeling a little lost and wondering what will happen next for you.

It can be a very anxious time as an employee, with lots of uncertainty for the future. But there are a range of options for employees that are dismissed as a result of their employer liquidising the business.


Depending on the circumstance of your employers liquidisation, they may do one of three things:


Make you redundant


If you’re made redundant, you will be informed by the liquidator on how your job is affected and what you can do next following your dismissal. You’ll be provided with a factsheet named the RP1 and a case reference number that you can use when applying for any payments that you are owed.


You are also entitled to apply to the government for a redundancy payment, any holiday pay owed, any unpaid wages, overtime or commission and money you would have earned while working your notice period.


You’re also able to claim compensation if you feel your dismissal was unfair. You can make this claim to the employment tribunal service if you were dismissed on unfair grounds, or there was no proper consultation carried out regarding your redundancy.


Ask you to continue to work


If your company is attempting a rescue or is planning to sell the business, then you may be asked to continue working in the interim. If the business then goes on to close at a later date, you will still be entitled to all the same rights you were before, such as redundancy pay.


The same applies for the business being sold, your employment rights will not be affected. However, you won’t be able to claim any holiday pay, wages, bonuses or commission that you’re owed between the day of the liquidation and the day you are dismissed.


Transfer you to a new company


You may be transferred to a new employer, whether this be a different business or the current one that has been bought out. If this is the case, you’re not eligible to apply for any money from the government if you were transferred before the employer went into liquidation. However, your original employee rights will remain from the date that your original employment commenced i.e. as if there had been no transfer.


If the transfer happened afterwards, then you are entitled to redundancy pay, statutory notice pay and any outstanding payments owed from your employers such as unpaid wages, holiday entitlement and commission and bonuses.


How much are you entitled to receive?


The National Insurance Fund


The National Insurance fund allows you to apply for several different payments in the circumstance that you become unemployed due to a company closing down. The fund guarantees a basic payment to cover several costs and typically processes 80% of all payment claims within three to six weeks of the initial claim being made.


The amount of money that you’re entitled to from the National Insurance Fund following your employer going into liquidation depends on how long you were employed for, the terms of your contract of employment and how old you are. Payments are capped, so there is no guarantee that you will receive the full amount that you are owed. However you are able to claim for the following payments:


Wage Arrears


You’re able to apply for any unpaid wages that you are owed, including bonuses, commission and overtime. However, you’re only entitled to payments outlined in your employment contract. You are only entitled to receive up to eight weeks worth of money owed. So if you’ve missed payments for 9 weeks or more, you will still only receive 8 week’s.


Wage and other monies owed by your employer are capped at a total of £508 per week (for the tax year 18/19). So if you were previously earning more than this, you’ll need to prepare to be at a loss. You will also pay the normal income tax and National Insurance on these payments. This doesn’t affect your rights to claim a tax refund if you pay too much.


Statutory Notice Pay


Even if it isn’t included in your contract of employment, you will be entitled to a paid notice period when you are made redundant. You can claim for this payment if you did not work a notice period, worked a partial notice period or worked an unpaid notice period.


This notice pay is worked out by one week’s notice for every year you were employed, up to a maximum of twelve weeks. Again the payments are capped at £508 per week. If you were employed for less than one year, then you are entitled to one week’s notice starting at one month’s service.


Holiday Pay


You’re eligible to receive holiday pay on any holiday entitlement that you did not take before your dismissal – which is known as ‘holiday accrued’. You’re also able to apply for holiday payment for days you took but were not paid for – known as ‘holiday pay taken.’


You are only entitled to payments based on holidays taken or accrued in the previous twelve months before the company went into liquidation. The payment is capped at 6 weeks of holiday days and again capped at £508 per week. You also pay the standard income tax and National Insurance amounts on this and can claim a refund if you pay too much.


Redundancy Pay


If you’ve been made redundant, were an employee or worked for the business for two or more consecutive years, then you are entitled to redundancy pay. You’re eligible to receive half a week’s pay for each full year you were employed and you are under 22 years old, one week’s pay for each full year you were employed and between 22 and 40 years old and one and half week’s pay for each year you were employed and are 41 years of age or above.


Again these payments are capped at £508 per week, and you’re entitled to a maximum of 20 years that you were employed with the business.


Unpaid Pension Contributions


You’re only entitled to unpaid pension contributions owed in the prior twelve months to the company going into liquidation. You will need to contact the liquidator if you’re missing these contributions.


Unemployment benefits


You could be eligible to receive unemployment benefits if you lose your job. If you do not register as unemployed and apply for unemployment benefits following your dismissal, then you may receive less statutory notice payment.


How much notice should you be given?


In the event your employer goes into liquidation, you must be given the notice term outlined in your employment contract or the statutory minimum notice period (whichever is longer).


The statutory notice period is legally the minimum period your employer has to give you. This equates to one week’s notice if you have been employed by the company for one month up to two years.


If you have been employed for longer than two years, you will receive two weeks’ notice and an extra week for every year worked beyond that up to a maximum of 12 weeks.