A Guide to Employee Claims
Our expert employment team is here to guide you through employee claims, offering practical support and clear guidance when an employer becomes insolvent.
The current statutory limit for employee claims is capped at £719 per week. This amount is reviewed annually and typically increases on 6 April each year.
When a UK company enters insolvency process – whether through administration, liquidation or another insolvency procedure- employees face uncertainty around payment of arrears of wages, holiday pay, notice periods and redundancy entitlements. UK employment law offers certain protections in these situations, allowing employees to claim outstanding amounts through the Redundancy Payments Service (“RPS”).
This factsheet outlines the types of claims employees can make, how these are treated in insolvency proceedings and the process for accessing payments form the National Insurance Fund. Understanding your rights will help you secure the support you’re entitled to during a company’s financial collapse.
Arrears of wages
The RPS can pay a maximum of 8 weeks arrears of wages, capped at the statutory weekly limit. This claim is subject to Tax and National Insurance deductions. . An £800 preferential limit applies to a claim for the arrears of wages in respect of the four months period prior to the relevant date. Any claim in excess of this amount and/or outside the four month period would be an unsecured claim. This claim is subject to Tax and National Insurance deductions.
Holiday Pay
The RPS can pay a maximum of 6 weeks holiday pay accrued within last 12 months of the insolvency. How holiday pay is calculated can be complicated further guidance can be given if necessary. This claim is subject to Tax and National Insurance deductions. Any excess holiday pay claim, not paid by the RPS becomes the employee’s individual preferential claim in the insolvency.
Redundancy Pay
Redundancy is payable to employees who have completed a minimum of two years’ continuous service with the company and is capped at 20 years of service. To be eligible to claim redundancy pay, the employee must submit an RP1 claim online to the RPS within six months of their dismissal date.
The employee’s weekly pay for the purpose of the redundancy pay is usually based on the last 12 weeks gross average weekly earnings prior to dismissal and is calculated as follows:
- Aged under 22: half a week’s pay for each full year of service (0.5 week’s pay)
- Aged 22 to 40: One week’s pay for each full year of service (1 week’s pay).
- Aged 41 or over: One and a half week’s pay for each full year of service (1.5 week’s pay)
Redundancy pay is not subject to Tax or National Insurance deductions.
Payment in lieu of notice
Payment in lieu of notice is calculated at one week for every complete year an employee has worked less any new earnings and/or benefits/notional benefits an employee is/or was entitled to receive during their notice period. A maximum of 12 weeks can be claimed from the RPS. This claim is subject to Tax and National Insurance deductions.
Once an employee has submitted their RP1 claim for any arrears of wages, holiday or redundancy that may be owed, the RPS will contact the employee when their notice period has ended and will send an RP2 form for the employee to complete and to make a claim for payment in lieu of notice. A payment in lieu of notice claim paid by the RPS will only compensate an employee for their financial loss during their notice period. It is therefore important that once an employee has been dismissed by an employer, if they haven’t got a new job which starts immediately, they should contact their local Jobcentre to make an appointment to claim any benefits they may be entitled to as if an employee fails to do this any benefits not claimed which they may have been entitled to will be deducted from their payment in lieu of notice claim. Locate your local Jobcenter Plus here.
Also many employee’s contracts of employment provide a one month or three month notice period to/from their employers. If there is a shortfall in the number of weeks and/or difference in the rate of pay paid to an employee by the RPS any excess payment in lieu of notice claim would be the employee’s individual unsecured claim in the insolvency.
Free advice line for distressed company directors > 0800 331 7417
Expenses
Personal expenses cannot be claimed from the RPS. Therefore, these will be treated as an employee’s individual unsecured claim in the insolvency. To validate the claim, the insolvency practitioner appointed would require the employee and/or the Company to provide supporting documentation and receipts to support the claim.
SMP - maternity pay
If an employee is made redundant and is owed statutory maternity pay, they will need to contact HM Revenue & Customs (“HMRC”) on 03000 560 630 to notify them of their redundancy and confirm the Company is no longer in a position to make the required payments. HMRC will then issue a form to both the employee and the insolvency practitioner to complete to confirm the outstanding maternity pay. To enable the insolvency practitioner to deal with the claim they will require a copy of the MAT B1 form as well as the relevant payslips etc to support the claim. Once the claim has been agreed, HMRC will then submit a claim against the insolvent company in respect of the SMP paid to the employee.
Is liquidation the right option for you?
Check the health of your business with our free business health check tool. Get an indication as to whether your company has what it needs to survive.
Includes:
-Company health assessment
-Types of liquidation available
-Options & next steps
*All information provided is completely confidential and will not be shared with a third party
Pension
If the company operates a pension scheme, the insolvency practitioner(s) will contact the pension provider once the insolvency procedure has commenced. This is to determine the scheme type, obtain details of the members and ascertain whether there are any outstanding pension contributions owed by the company. If there are outstanding employee and employer pension contributions, these can be claimed from the RPS providing the unpaid contributions relate to the 12 months prior to the relevant date. The relevant insolvency practitioner appointed will submit an RP15a claim form to the RPS for processing and payment. Once agreed the RPS will make the payment directly to the pension provider. The employee does not need to get involved. Any pension arrears outside the 12 month period would be the employee’s individual unsecured claim in the insolvency.
Additionally, where there is an overlap between employee pension arrears and an arrears of wages claim, the employee’s arrears of pension for this period of overlap cannot be claimed from the RPS. This amount would also form as part of the employee’s individual unsecured claim in the insolvency.
How can we help - Book a free 1-2-1
If your company is struggling with unmanageable debts or if you have concerns about your company’s future, we can assess your situation and provide you with tailored solutions and options.
During your free initial advice meeting we will discover a true picture of your company’s financial situation and offer practical and expert guidance on your next steps.
Initial meetings can be held at our office or your premises and are completely confidential.
There is no charge for this meeting – charges only apply if and when terms of engagement have been agreed.
RPS claim procedure
Information on how to submit a claim online to the RPS will be provided once the company has formally entered an insolvency procedure. Once the insolvency practitioner has received the RPS Case reference Number (“CN”) from the RPS they will send a letter to the employee with the CN and an RP1 help sheet, which contains important information specific to each individual employee to assist with the submission of their claim to the RPS. The contact details for a member of our Employee Support Team who can assist you to make your claims is also provided. After the submission of an RP1 claim form, the RPS usually take approximately 3 to 6 weeks to process claims once it has received all the necessary information and make any payments due.
Statement of affairs – employees
The figures listed on the statement of affairs are the employees’ total claims against the Company. The preferential figure will include arrears of wages up to £800 and all accrued holiday pay. The unsecured figure relates to any arrears of wages over £800, redundancy pay, payment in lieu of notice and expenses. The estimate of employees’ claims relate to the total claims based on full rates of pay, with no RPS cap applied, no deductions for mitigated claims and/or Tax and National Insurance deductions etc. Therefore, the figures listed for employees on the statement of affairs of the company is not necessarily what an employee can expect to receive from the RPS. Any excess balance owed to an employee, not paid by the RPS will be their own individual claim in the insolvency case and should sufficient funds be available the employee will receive a dividend payment.
Support
Facing the insolvency of your employer can be unsettling, but it’s important to know that support is available. Employees have legal rights to claim certain unpaid entitlements, and the RPS exists to help ensure you receive what you’re owed. Acting promptly and understanding the claims process can make a significant difference.
Director Claims
The RPS closely scrutinises claims submitted by directors, particularly where the directors weekly pay falls below the National Minimum Wage. Prior to our appointment, we issue a standard letter to the director(s) outlining the additional documentation required by the RPS to assess their RP1 claims. It is essential that directors provide the documentation to the RPS promptly following the submission of their RP1 claim to avoid delays in the assessment process and payment of their claims.
If a director’s claim is rejected by the RPS and they wish to challenge this decision, they have three months from the date of the rejection letter to submit a claim to the Employment Tribunal. Directors intending to pursue this route are advised to seek independent legal advice.
P45s
Once you have been made redundant your employer should issue you with a P45. The P45 should only include payments made to you by the company and should not include any claims/payments due/made to you by the RPSw
Meet the specialists supporting your case
Our strength lies in our people. Our team combines insolvency, financial and investigative expertise, with sector-specific knowledge built over many years.
Get the support you need
At McTear Williams & Wood, we are committed to making the redundancy and claims process as clear, efficient and stress-free as possible. If you are a business owner or an employee facing insolvency, contact our dedicated employment team today to guide you every step of the way.
OUR SERVICES
How can we help your business?
We work with SMEs, family businesses, and local companies facing financial pressures. Whether you’re dealing with cash flow challenges or considering your next steps, our team tailored advice on business rescue, insolvency, administration, and liquidation – always focused on finding the best possible outcome for you.
Professional support for your business, helping you overcome an adverse financial situation and return to profitability.
Taking early advice is key. It is sometimes possible to trade out of the situation if advice is sought early enough.
Get the extra time you need to make important changes to your business whilst keeping your company operational.
Get help to close down your company and pay off all remaining debt before striking it off the register.
