Wages owed by insolvent employer

Yes, you can make a claim, and the route depends on what you are owed and the type of insolvency process your employer has entered.

Your main protection comes from the Employment Rights Act 1996, which provides a statutory guarantee for certain payments when an employer becomes insolvent. The scheme is administered by the Redundancy Payments Service, which is part of the Insolvency Service.

What you can claim from the National Insurance Fund:

The Secretary of State will pay certain debts owed to you out of the National Insurance Fund, subject to statutory caps. These include:

1. Arrears of pay, up to a maximum of eight weeks, capped at the current statutory weekly limit (currently £700 per week from 6 April 2024).
2. Holiday pay, up to a maximum of six weeks, subject to the same weekly cap.
3. Notice pay, subject to the statutory minimum notice period and the same weekly cap.
4. A statutory redundancy payment, if you qualify (generally requiring two years of continuous service and based on age, length of service, and weekly pay capped at the same weekly limit).
5. Any basic award of compensation ordered by an employment tribunal that remains unpaid.

How to claim:

If an insolvency practitioner has been appointed (for example, an administrator, liquidator, or trustee in bankruptcy), they should provide you with the relevant forms, including the RP1 form for redundancy and the CN form for other debts. You can also contact the Redundancy Payments Service directly or apply online through GOV.UK.

You do not need to wait for the insolvency practitioner to contact you. If your employer has entered a formal insolvency process and you have not heard anything, you can proactively reach out to the Insolvency Service.

Important points to be aware of:

The statutory cap on weekly pay means that if you earn above the cap, you will only receive the capped amount through the scheme. Any shortfall above the cap remains a debt owed to you by the insolvent employer, and you would need to submit a proof of debt in the insolvency proceedings. In practice, unsecured creditors in an insolvency often receive little or nothing beyond what the statutory scheme provides.

The definition of insolvency for these purposes is set out in section 183 of the Employment Rights Act 1996 and covers situations including winding-up orders, administration, voluntary arrangements, bankruptcy of an individual employer, and appointment of a receiver. If your employer has simply stopped trading without entering a formal insolvency process, the position is more complicated. In that situation, you may need to pursue a claim through the employment tribunal for unpaid wages or through the county court as a debt, and if the employer then becomes formally insolvent, the statutory scheme may become available.

Timescales:

There is no strict statutory time limit for claims to the Redundancy Payments Service, but you should act promptly. For a statutory redundancy payment specifically, you must normally claim within six months of the relevant date, extendable to twelve months in certain circumstances. For employment tribunal claims relating to unpaid wages or notice pay, the standard three-month less one day time limit from the date of the relevant failure to pay applies, with the requirement to notify ACAS for early conciliation first.

Practical next steps:

1. Identify what type of insolvency process your employer has entered and who the insolvency practitioner is. This information is usually available from the Companies House register or the Insolvency Service.
2. Gather your evidence of what you are owed, including payslips, your contract of employment, any written communications about pay, and records of your accrued but untaken holiday.
3. Contact the insolvency practitioner and ask for the relevant claim forms if they have not already been provided.
4. Submit your claim to the Redundancy Payments Service promptly, either online through GOV.UK or by post.
5. If you believe your employer has not entered a formal insolvency process but has simply stopped paying you, consider whether to bring an employment tribunal claim for unauthorised deduction from wages under section 23 of the Employment Rights Act 1996, bearing in mind the three-month time limit.

If you can share more details about what you are owed, how long you worked there, and what has happened with the business, I can give you more tailored guidance.