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A guide for redundant employees

Written by Iain Campbell Operations Director 6 April 2022

A guide for redundant employees

A guide for redundant employees

If you just been told that your company has gone into administration then email me at Please give us the name of the company and I will find out what I can for you.

In return please can you social "like", "tweet" or "bookmark" this page so others can find out about it.

Thanks.  Alternatively you can look at our facebook page for redundant employees or download our employee guide for insolvency situations.  

Or you can watch this video that explains your rights. This video will explain your rights as an employee if the business you work for has become insolvent. This is a worrying time and for further information please refer to our guide for employees on our website.  At the end of the video there is a link to the Government website which explains things further. 

This can be a real shock to you and we know that many people get very little help from the receiver or administrator. So read our guide below and or download this guide from DBEIS,

DeBIS guide for employees

If you have any questions the guide or the Department for Business Energy, Innovation and Skills (formerly DTI and DBERR) should answer them (call their helpline; 0845 145 0004), otherwise email us and we will try to help.

Brief Guide to the Calculation of the Employees Claims in Insolvency:

Once the total claims have been worked out the employees can claim directly from the Department for Energy Innovation and Skills (DBEIS), who then stands in the employees' shoes and can claim against the company.

The purpose is to guarantee minimum payments to the employees which may not (and often are not) paid out of the insolvency as a result of insufficient funds or to avoid preferences. All employees claims are calculated as per the guidelines in the legislation but the actual payments made by the Government are subject to maximum "capped" payments. The limit on the amount of a week's pay under the insolvency provisions of the Act is currently £571 per week, the cap is reviewed annually.

The claims and current statutory limits are as follows:

Arrears of pay:

Most people are paid weekly or monthly in arrears. This claim is limited to 8 weeks at the statutory limit of £571 per week and includes salaries, wages and sales commissions.

Holiday pay:

Holiday pay is limited to 6 weeks of holiday pay due in the last 12 months, at the statutory limit of £571 per week.

Payments in lieu of notice:

Under the contract of employment between employer and employee any required notice amount due from the employer is payable at the statutory limit of £571per week. However, benefits and/or money earned obtained further employment during your notice period paid to you will be deducted from your compensation. It is important to claim benefits as these will be automatically deducted from your claim even if you have not claimed them.

Redundancy Payments:

Redundancy is where the employer has ceased or intends to cease the business, or the business in the place where the employee is employed. The requirements of that business for the employee to carry out his or her particular kind of work, or to carry out a particular kind of work in the place of the employee's employment have ceased or diminished, or are expected to cease or diminish. Any amount payable is capped at a ceiling of £571 per week. This statutory redundancy payment is calculated by reference to the following factors.

  1. Length of the employee's continuous service at the relevant date and
  2. The employee's week's pay at the calculation date,
  3. The employee's age at the relevant date (if he is aged over 64 it is subject to reduction) and during his employment.

Here is a calculator to show how much is owed to you.

The maximum number of years to be taken into account for the purposes of calculating a redundancy payment is 20 and the entitlement is calculated as follows:

  1. One half week's pay for each complete year in which the employee was less than 22 years old;
  2. One week's pay for each complete year in which the employee was less than 41 but not less than 22 years old;
  3. One and a half week's pay for each complete year of employment in which the employee was 41 years old or more.
  4. If over 64 years of age the employees claim is reduced by one twelfth for each month over 64 to a maximum of 65 where there is no payment. 

  5. Employees must be able to show two calendar years of continuous employment at the relevant redundancy date, but any period of continuous employment before his 18th birthday does not count. Weeks count as weeks of continuous employment if an employee actually works 16 hours or more or works under a contract normally involving 16 hours' work or more. 

As ever redundancy claims are complex and the brief outline here is not comprehensive or case specific.

If your employer is declared insolvent, or cannot or refuses to pay, and you have done everything you can to get your payment, you can apply to the DBIS for a direct payment from the National Insurance Fund.

But you must have applied in writing to your ex-employer for a payment within six months of the date your employment ended, or applied successfully to an employment tribunal within the six months after that.

Please be aware that DBEIS will seek to mitigate payments to redundant employees by assuming that they are claiming job seekers allowance. Any pay received in the period between redundancy and claim payment will generally be deducted. So it's probably best practice to make those claims anyway to help relieve financial hardship.

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