What You Need to Know as a Director
As a Director of a company considering placing a company into some form of insolvency procedure you will of course be concerned about the position of the employees. This may include you, as long as you are an employee of the company.
Insolvency and Employees
Where the assets of the company are insufficient to pay the claims of the employees, there is good news. A scheme exists, operated by the Redundancy Payments Service, that will (subject to limits) provide funds to pay the claims of the employees. This scheme ensures that the statutory rights of the employees are paid out.
Potential Redundancy Claims of Employees
An employee may have a redundancy claim in respect of some or all of the following:
- Arrears of wages, salary, bonuses and commission unpaid to the date of dismissal. (The scheme will cover up to 8 weeks at a maximum of £544 per week)
- Accrued holiday pay in respect of holiday not yet taken (the scheme will fund up to 6 weeks entitlement at a maximum of £544 per week.)
- Statutory Notice Pay, where an employee has been dismissed with less than their contractual or statutory entitlement, and so is able to claim for their wage/salary for this period. (The scheme will fund 1 weeks pay for every complete year of employment to a maximum of 12 weeks to a maximum of £544 per week).
- Statutory Redundancy Pay. To qualify, an employee must have been continuously employed for at least 2 years, and the amount of their claim will depend on their age and how long they have been employed. In this regard the rules are:
- An employee aged 18 to 21 years old will receive half a week’s pay for each year of employment
- An employee aged between 22 to 40, receives one week’s pay for each year of employment
- An employee aged 41 and above, can claim one and a half week's pay for each year of employment
The scheme will pay out to a maximum of 20 years' employment (so a maximum of 30 weeks equivalent to a maximum of £544 per week.) In some instances, the amount paid in respect of redundancy pay can be considerable and so it may allow a director to fund the liquidation of a company with few assets.
- Unpaid Pension Contributions. This is a particularly complex area and whilst the scheme will provide some cover, the amount will depend on the particular circumstances of the pension scheme
- Unpaid Expenses. The employee may be owed expenses (e.g. for travel) and whilst this may be a valid claim against the company, it is not covered to any extent by the scheme.
As mentioned above, the extent to which some claims will be settled by the scheme operated by the Redundancy Payments Service, is subject to a limit. That part of any claim in excess of the limit, still remains a valid claim that will need to be dealt with by the insolvency practitioner (“the IP”) administering the insolvency of the company.
What Must I do as a Director?
Whilst you will need to provide the necessary information (e.g. payroll details, employee details) to the IP, one of the roles of the IP will be to liaise with the Redundancy Payments Service and the employees, to ensure that claims are dealt with as quickly and efficiently as possible.
Greenfield Recovery Can Help You
Greenfield Recovery is well-known in business recovery and insolvency. Our advisors are available to guide you on any aspect of insolvency, including of course the best way to deal with your employees.
If you wish to discuss the matter of employee redundancy claims please call us on (0121) 201 1720 or get in touch with us online via our website. We have a customer-friendly team and a member of our team will be in touch with you shortly.
