EMCC European Monitoring Centre on Change

United Kingdom: Wage guarantee in case of insolvency

United Kingdom
Phase: Management
Type:
Wage guarantee in case of insolvency
Last modified: 29 June, 2021
Native name:

Employment Rights Act 1996

English name:

Employment Rights Act 1996

Article

Part XI, chapter 6

Description

In the UK, a public agency called the Insolvency Service advises workers who have lost their jobs as a result of the bankruptcy of their firms and have not received the full wage or salary owed to them. Employees who have been continuously employed for two or more years can claim Statutory Redundancy Pay.

The UK Department for Business Innovation and Skill (BIS), now known as Department for Business, Energy and Industrial Strategy (BEIS) established the National Insurance Fund that guarantees the workers' claims. It is financed by contributions from employers, employees and the self-employed.

Workers eligible for assistance may claim wages, holiday pay, or notice pay that is owed to them by their employer.

Workers may claim a maximum of eight weeks unpaid wages as well as unpaid pensions contributions, bonuses, remuneration for overtime work, sick pay, maternity pay, and a maximum of six weeks holiday pay.

If workers worked the statutory notice period but they were not paid by their employer or they were dismissed without notice or they did not work their full notice, they may also claim statutory notice pay (1 week after 1 month of service, going up 1 week per year of service up to 12 weeks). Payments are capped at the statutory rate of £538 (€592 as at 13 June 2020) per week for each type of claim.

Claims must have accumulated up to the date that insolvency is filed for. If after payment of the insolvency income there are still unsatisfied claims from the employees, these are considered by the insolvency administrator in the insolvency procedure.

Claims can only be made after redundancy/dismissal and must be made in writing to the employer or an employment tribunal within six months of the job ending.

A company is considered insolvent in case of filing for insolvency, being put under administration or a voluntary agreement with creditors that has been accepted by law, as well as when an entrepreneur has died and the company has been placed in administration.

Employees submit their application with BEIS, where the claims are calculated and the amount directly transferred to the employees.

Comments

The Insolvency Service publishes annual reports, which include figures of the number of claims. In 2015-2016 the Insolvency Service processed 60,063 redundancy claims. Moreover, 98.8% of such claims were processed correctly, and 81% were actioned within 3 weeks of the initial claim. 

In 2018–19 redundancy claims increased to over 75,000 claims. In 2018–19 claimants were paid within an average of 12.2 calendar days.

Cost covered by
  • Companies
  • Employee
Involved actors other than national government
  • Other
Involvement others
National Insurance Fund; The Insolvency Service; Insolvency administrator
Thresholds
No, applicable in all circumstances
Sources
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