Employer insolvency owing wages

Overview of your position

When an employer becomes formally insolvent, employees have a special safety net. Instead of relying on the employer paying you, you can claim certain amounts directly from the government through the Redundancy Payments Service (RPS), which pays out of the National Insurance Fund. This exists precisely because an insolvent employer usually cannot pay in full. There are, however, statutory limits on what you can recover this way, and anything above those limits has to be pursued as a creditor in the insolvency itself.

The key threshold is that the employer must be formally insolvent. “Going out of business” is not always the same thing. If the company has simply stopped trading, been dissolved, or the owner has disappeared without a formal insolvency process, the RPS route may not be immediately available and you may need to take other steps first (explained below).

What counts as insolvency

The government scheme applies where there is a recognised formal insolvency event. For a company this typically means administration, creditors’ voluntary liquidation, compulsory liquidation (winding up by the court), receivership, or a company voluntary arrangement. For an individual employer (a sole trader) it means bankruptcy or a voluntary arrangement.

When one of these happens, an insolvency practitioner (IP) is usually appointed. The IP gives you a case reference number, often called a “CN” number, which you need to make an online claim. If no IP has been appointed, you can ask the Insolvency Service for help, and in some situations the Secretary of State can still authorise payment.

If the company has simply been struck off or dissolved without any formal insolvency, there is no IP and no CN number. In that case you may need to apply to have the company restored to the register or wound up before you can access the fund, which is more involved. Establishing whether a formal insolvency has actually happened is therefore the first thing to pin down.

What you can claim from the government

Through the Redundancy Payments Service you may be able to recover the following, each subject to its own cap.

Unpaid wages, including things like overtime, bonuses and commission, but only where these are owed under your contract. This is limited to up to 8 weeks. If you are owed more than 8 weeks of arrears, you can only claim the 8 weeks you choose (usually the highest-paid weeks) through this route.

Holiday pay, covering both holiday you accrued but did not take and holiday you took but were not paid for. This is limited to holiday relating to the 12 months before the insolvency, and to a maximum of 6 weeks.

Statutory notice pay (compensation for loss of notice). You are entitled to at least one week’s notice after one month’s service, rising to one week per full year up to a maximum of 12 weeks after 12 years. You claim this within your application, and it is paid subject to a duty to give credit for money you earned or could have earned, or benefits you received, during the notice period.

Statutory redundancy pay, if you had at least two years’ continuous service and were dismissed by reason of redundancy.

All of these amounts are subject to a statutory weekly pay cap. For dismissals on or after 6 April 2025 the cap is £719 a week, and it is due to rise to £751 a week from 6 April 2026. This means that even if your actual weekly pay is higher, each “week” of your claim is calculated using the capped figure. These payments are also subject to the usual deductions of income tax and National Insurance where relevant.

What the scheme does not cover

Amounts above the caps are not lost automatically, but they cannot be recovered from the government. Anything beyond the statutory limits, such as the excess of your real wages over the weekly cap, wages beyond 8 weeks, or contractual enhanced redundancy or notice pay, becomes a claim you must submit to the insolvency practitioner as a creditor of the employer.

In the insolvency, part of what you are owed ranks as a preferential debt, which is paid ahead of ordinary unsecured creditors. Preferential status covers certain arrears of wages (up to a statutory monetary limit) and accrued holiday pay. Amounts above the preferential limits rank as ordinary unsecured debts, which in practice are often paid only in part or not at all, depending on what assets are available.

How to claim from the Redundancy Payments Service

1. Confirm the type of insolvency and obtain the case reference (CN) number from the appointed insolvency practitioner. If you do not know who the IP is, the employer or the Insolvency Service should be able to tell you.

2. Gather your documents and details: National Insurance number, employment dates, your pay, your holiday entitlement and how much you had taken, any redundancy letter, correspondence with the employer, and your bank details.

3. Make the claim online through the GOV.UK service for money owed when an employer is insolvent.

4. Watch the time limit. You should apply for redundancy pay, unpaid wages and holiday within 6 months of the date you were dismissed. If you have a good reason for missing that deadline, a late claim can sometimes still be accepted within a further period, but you should aim to claim promptly to avoid difficulty.

Payments are typically made within a few weeks of a valid claim being processed, though timing depends on the IP providing information and the complexity of the case.

If there is no formal insolvency

If your employer has stopped paying you but is not formally insolvent, the government fund is not available and your remedy is against the employer directly. In that situation the main options are as follows.

An unauthorised deduction from wages or breach of contract claim in the employment tribunal for unpaid wages and holiday pay. There is normally a strict time limit of three months less one day from the last date wages were due (or the last in a series of deductions), so acting quickly matters. Before issuing a tribunal claim you must first notify ACAS to start Early Conciliation.

For pure debts you could alternatively bring a civil claim in the County Court, but if the employer genuinely has no money, a judgment may be difficult to enforce.

If the employer is a company that appears unable to pay its debts, you can consider serving a statutory demand and, if unpaid, petitioning to wind up the company, though this carries cost and risk and is usually a last resort. Where a company has been dissolved, restoration to the register may be needed to pursue either the company or the insolvency fund.

Practical next steps

Start by establishing exactly what has happened to the employer: whether an insolvency practitioner has been appointed, and what type of insolvency it is. That single fact determines whether you use the government scheme or must pursue the employer yourself.

Assemble your evidence now while you can: contract, payslips, bank statements showing missing pay, holiday records, and any redundancy or dismissal letter. Calculate what you are owed under each heading (wages, holiday, notice, redundancy) so you can complete a claim accurately.

If there is a formal insolvency, submit your RPS claim online without delay and keep the 6 month deadline in mind. Separately, submit your full claim (including amounts above the statutory caps) to the insolvency practitioner as a creditor so that any preferential and unsecured elements are recorded.

If there is no formal insolvency, contact ACAS to begin Early Conciliation and protect your tribunal time limits, since the three month deadline can pass quickly.

Where the answer could change

The right route depends heavily on facts you have not yet stated: whether the business was a limited company or a sole trader, whether a formal insolvency process has begun and an IP is in place, your length of continuous service, whether you were actually dismissed and when, your normal weekly pay, and how much holiday and notice you are owed. If you can confirm the type of insolvency, the dismissal date and your length of service, the entitlements and the best sequence of steps can be pinned down more precisely.