What rights do I have if I am made redundant by an insolvent employer?

What rights do workers have once they have been made redundant by an employer that has gone into administration or liquidation? Coodes Solicitors Employment Lawyer Philip Sayers comments, in light of the latest news from troubled café chain Patisserie Valerie.

In the latest in a stream of headlines about Patisserie Valerie, it has now been revealed that the company has failed to pay hundreds of its redundant workers.

If a company becomes insolvent, some or all of its employees may be made redundant. This is what has happened in the case of Patisserie Valerie. When an employee is made redundant, he or she will retain certain rights and entitlements, even if the employer is unable to pay them.

Employees who have been made redundant due to insolvency have the right to know how their job is affected and what they should do next. An insolvency practitioner will step in to handle a number of employment procedures. Their role includes providing each employee with a RP1 form and a case reference number to use when applying for any money owed. Depending on the situation, an employee can apply to the government’s Redundancy Payments Office for a number of outstanding monetary arrears due from their employer.

Within six months of being made redundant, an employee can apply to the government for the following:

Redundancy payment

Employees should have been continuously employed by the insolvent business for a minimum of two years to claim redundancy payment, which is capped at £508 a week. An employee under the age of 22 can be eligible for half a week’s pay for each year they completed at that age. This rises to one week’s pay for each year for employees aged between 22 and 40 and one and half week’s pay for each year if the employee is 41 or older, to a maximum of 20 years.

Holiday pay

After being made redundant, an employee can get paid for holiday owed. This includes any holiday days which they were not paid for in the 12 months before the insolvency for up to six weeks of holiday days. This is capped at £508 a week.

Outstanding payments

An employee who has been made redundant may also be able to claim for outstanding payments, such as unpaid wages, overtime and commission. This is also capped at £508 a week and an employee can receive up to eight weeks’ worth of outstanding payments.

Statutory notice pay

An employee is entitled to a paid statutory notice period, capped at £508 a week, even if it is not in their contract. An employee will be paid one week’s notice for every year they were employed, up to a maximum of 12 weeks.

More information, and details on how to apply, can be found on the government’s website.

These rights and compensation are only available when the employer enters into a formal insolvency event, which can include administration, liquidation or Company Voluntary Arrangements (CVA).

One problem I have encountered when advising clients is when an employer runs out of money and ceases trading but fails to enter into a formal insolvency event. In that situation for all sums except a redundancy payment, an employee will have to bring about a tribunal claim and get a judgment against the employer before the Redundancy Payments Office will pay out.

For more information on this or any Employment enquiries contact Philip Sayers, Employment team, Coodes Solicitors on 01872 246200 or philip.sayers@coodes.co.uk