With businesses up and down the country face challenging times, some are sadly finding that they are having to close or take action to protect other parts of their business.
But where does this leave you as an employee. In their latest monthly column, Woodfines Solicitors looks at your rights if you employer goes into insolvency.
What are my rights if my employer is insolvent?
High Street stalwart Debenhams recently went into administration for the second time in less than 12 months, as the enforced closure of non-essential shops further impacted the already troubled retailer. It has already axed 6,500 jobs, while 14,000 more are at risk.
But what are your rights if your employer is facing insolvency?
What is insolvency?
A business becomes insolvent if it cannot pay its creditors when debts become due. There are several common processes employed to deal with insolvency, including:
- Administration – which aims to rescue the company as a ‘going concern’, i.e. on the assumption that it will be able to continue operating for the foreseeable future
- Liquidation – the company is closed and its assets sold to pay its various creditors
- Administrative receivership – the company is closed and its assets sold to pay a single creditor (e.g. a bank).
What will happen to me if my employer is insolvent?
If the company you work for is insolvent, there are several things that could happen:
- You could be made redundant
- You may be asked to continue working
- You may be transferred to a new employer
What am I entitled to if my employer is insolvent?
Depending on factors such as the length of your employment and your age, you may be able to apply to the government’s National Insurance Fund for redundancy pay, wages, and other money owed if your employer becomes insolvent.
If you’ve worked for your employer for more than two years, you’ll be entitled to:
- Half a week’s pay for each full year of employment if you’re under 22
- A week’s pay for each full year of employment if you’re between 22 and 40
- One and a half weeks’ pay for each full year of employment if you’re 41 or older
- Redundancy pay is capped at £538 per week as of 6 April 2020 (£525 if you were made redundant before this date). If you are asked to continue working for your employer and are later made redundant, you’ll still be eligible to apply for redundancy pay through the National Insurance Fund.
You can claim up to eight weeks’ unpaid wages, as well as other money owed such as bonuses, overtime and commission (capped at £538 per week).
You can claim for untaken holiday, as well as holiday taken that you were not paid for, in the 12 months prior to your employer becoming insolvent (capped at £538 per week).
Statutory notice pay
If you are made redundant, you are entitled to a paid notice period, even if you did not work one. Statutory notice pay is calculated as a week’s notice for every full year of employment (capped at £538 per week), up to a maximum of 12 weeks.
Please note that you won’t be entitled to claim for wages, holiday pay or statutory notice pay if you continue working for your employer but are later made redundant.
What are my legal rights if I am transferred to a new employer?
You’ll be protected by the Transfer of Undertakings (Protection of Employment) Regulations (TUPE), with a few exceptions where your employer is insolvent.
Essentially, TUPE ensures that you go to your new employer with your existing contract, rights and liabilities intact. It also stipulates that dismissals made as a direct result of the transfer will automatically be considered unfair.
Under TUPE, you’ll also retain the right to bring a claim against your new employer for unfair dismissal, redundancy, discrimination, unpaid wages, etc.
Knowledgeable and proactive employment specialists
Here at Woodfines, our expert Employment Law team understands the stress of losing your job in an uncertain economic climate – especially when your employer can’t pay what you’re owed.
That’s why our lawyers are here to ensure that you’re treated fairly and get what you’re legally entitled to. To get in touch, please email our team at firstname.lastname@example.org
In association with Woodfines Solicitors