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A guide for redundant employees

6th April, 2022
Keith Steven

Written ByKeith Steven

Managing Director


07879 555349

Keith is the author of the content on this comprehensive rescue, turnaround and insolvency website. He is the managing director of KSA Group Ltd - a specialist firm of turnaround and licensed insolvency practitioners. Keith was nominated for Turnaround Practitioner of the Year 2014 at the National Insolvency and Rescue Awards in 2014.

Keith Steven
  • A guide for redundant employees
  • Brief Guide to the Calculation of the Employees Claims in Insolvency
  • The claims and current statutory limits are as follows:

I’ve been made redundant due to my employer entering CVA, receivership, liquidation or administration. What now?

A guide for redundant employees

If you just been told that your company has gone into administration then email me at robertm@ksagroup.co.uk 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 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 DBT,

DBT guide for employees
If you have any questions the guide or the Department for Business Energy Innovation Skills (formerly DTI and DBERR) should answer them, otherwise email us and we will try to help.

Department for Business and Trade (DBT)
There is a helpline to answer your questions. The number to ring is 0845 145 0004 (calls are charged at local rates).

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 Business and Trade (DBT) 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 £643 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 £643 per week and includes salaries, wages and sales commissions.

Holiday pay:

Holiday pay is limited to 6 weeks of holiday pay due, in the current holiday year, at the statutory limit of £643 per week.  I.e you won’t be paid “rolled” over days

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 £643 per 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 £643 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.  https://www.gov.uk/calculate-your-redundancy-pay

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.

 

  1. 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 Department for Business and Trade (DBT) 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 Department for Business and Trade (DBT) 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.

 

Worried Director What Will Happen To Me After Liquidation?

in Company Liquidation What is …?

"A man in the pub said I cannot be a director of any other company if I liquidate my company. Is this true?"Actually, this statement is entirely false! Misconceptions like this frequently arise from individuals with limited understanding of the subject matter. Such misinformation can cause undue anxiety for directors considering liquidation, fearing it might personally affect them. Guess what? Listening to bar room experts, inexperienced accountants, or no insolvency specialist lawyers can stop decisions being made, this failure to make a decision is really what could land you in trouble. So how will liquidation affect me and how long does it take? Having a limited liability company means that the directors have little risk (or limited liability) if the company fails, as long as they have acted properly and acted in time. What is more, if as a director, you have been compliant and on the payroll for many years, you can actually claim redundancy from the government like any other employee. But, and it is a big but, if you fail to act in time, fail to act reasonably, fail to keep books and records, continue taking credit KNOWING that the company cannot possibly repay it, then you ARE at risk of personal financial loss or worse such as losing your house. So, act now and get help for your company and more importantly start reducing your own risks.Voluntary liquidation is the quickest most efficient way to deal with an insolvent company that has no future. As a director of an insolvent company, you are at risk if you do not act. This risk RISES the longer you don't act to put the company into liquidation.If you fail to act and the company is wound up by the creditors (compulsory liquidation) then the Official Receiver (OR) will be appointed to liquidate the business and he or she will investigate the activity of the directors and the business over the last 2-3 years. This is known as a conduct report on each director.  If the OR can prove there was wrongful trading where, for instance, you have taken credit from a supplier or took deposits from customers when you knew that it was highly unlikely that you could pay them back, then you could be made personally liable.This is known as the "lifting of the veil of incorporation" that protects directors under limited liability. If this happens then you could made liable for PAYE, VAT and creditors monies from the time that you should have known the company had no reasonable prospect of surviving the problems it faced.Additionally, the directors may face disqualification proceedings under the Company Directors Disqualification Act 1986 for up to 15 years, they can be fined and may face the loss of personal assets like your home, or even personal bankruptcy.Look, if you as directors have acted naively you may not know that you have broken these laws, but now you do know, it is vital to ensure that you protect yourself as a director by acting quickly to cease trading and put the company into voluntary liquidation; or consider a company voluntary arrangement if the company is VIABLE if the problems are solved. What is Creditors Voluntary Liquidation and what does it mean for me? In short, liquidation usually means, the company's trading stops and it's assets are turned into cash or "liquidated".All other possible liabilities, like employment liabilities, landlord's rent or payments to lease companies are stopped. It really is the end of the company, but the "business" may survive if a phoenix is organised. Liquidation is a powerful way to END creditor pressure and let you get on with your life. What if I have signed personal guarantees? If you have signed personal guarantees or indemnities to lenders, then the liquidation could lead to them being called in if the bank cannot get its money back from the company. There is little that can be done about that, but you should not delay decisions on liquidation to try and prevent a PG being called in: just think what ALL of the company's debts landing on your shoulders would do. Also it should be noted that HMRC now rank ahead of floating charge holders in any liquidation since December 2020.  Consequently, this may well mean that lenders that you have personally guaranteed will get less recovery hence exposing you more.All banks will agree a deal to repay the PG over time - provided you work with the bank to reduce their exposure.One great piece of FREE advice - always make sure that ALL tax returns, VAT returns and annual returns have been completed and sent in and that other "compliance" issues are dealt with wherever possible. These are important processes and will help protect you as individual directors. It shows that you have been acting properly.  I have heard about directors being able to claim redundancy in liquidation If you have been employed by the company and made payments via PAYE then you will be able to claim redundancy from the government and this is in fact a very simple process (20 minutes to fill out a form and we can help with that) so there is no need really to employ a third party to make a claim.  This process has been open to fraud so the HMRC are cracking down on operators that claim to be able to get money back when there is not enough "paperwork".  It isn't worth the risk.  If it sounds too good to be true then it probably is!You need to learn more about the options. This is clearly a general guide so, if you have any worries at all, please, just call us and we will talk you through the situation free and with expert guidance for your situation. Call one of our advisors or if you prefer, call our IPs (insolvency practitioners) now:Just one CALL will help relieve the stress and get you out of the mess.Why not call 08009700539 or 020 7887 2667 now?We could help you start the liquidation process today.(8.15am till 5.00pm; Out of hours call on 07833 240747, Wayne Harrison (IP)  or Eric Walls (IP) on 07787 278527)Finally, please remember this: NO BUSINESS is worth losing your health, relationships, marriages or your children over. Act properly, take advice, get the problem sorted and then get on with your life. In a little while the stress will go and you can focus on other things that are more important.Want more information on liquidation? Get our new free 2023 Experts Complete Guide to Creditors Voluntary Liquidation that covers Bounce Back LoansWe are experts in liquidation, voluntary liquidation, administration, pre-pack administration, business rescue, corporate rescue and company rescue, we can help solve your problems but only if you talk to us. Call 0800 9700539 for help.or email us your worries at help@ksagroup.co.uk 

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