Being made redundant is never easy. However, in most cases, if you’ve worked for your employer for at least two years, when you are made redundant, you’ll receive redundancy pay. But by the very nature of redundancy, if your employer has had to make you redundant, it may signify that your employer is in difficulty. So who pays your redundancy money if your employer cannot?

Five and ten pound British money notes

Your statutory redundancy pay

Your redundancy pay is called a statutory redundancy payment. It is calculated based on your age, weekly pay and number of years you’ve worked for your employer. You are also entitled to a paid minimum statutory Notice Period. It’s your employer’s duty to pay these, but your payments are capped. Your length of service is capped at 20 years and for redundancies on or after 6 April 2019, your weekly pay is capped at £525. That means the maximum statutory redundancy pay an employee will receive is currently £15,750.

Contractual redundancy payments

You may have a term about redundancy payments in your contract of employment, but these have to provide for at least the same as or more than your statutory redundancy entitlement. If your contract does not mention redundancy payments, then you are probably only entitled to statutory redundancy.

Businesses leaders meeting about company insolvency

Options other than redundancy

Do bear in mind, that in different situations, different things may happen. For example, if the business is bought out by another, you may be transferred to work for the new employer. You cannot claim any money from your former employer or the government if you were transferred before your former employer became insolvent.

My employer can’t pay my redundancy

An employer who can’t pay their debts, including employee redundancy payment, is known as being insolvent. There are a number of different types of insolvency including administration, liquidation, bankruptcy and receivership, so you may hear different expressions being used.

However, there will be a person put in charge of dealing with your employer’s affairs and finalising all the matters relating to the insolvency. They are normally known as an ‘insolvency practitioner’ or ‘official receiver’ and they should be able to tell you more, including if you can claim and how.

Your statutory redundancy rights

If your employer goes out of business, then you’ll still be entitled to receive your statutory redundancy pay but you’ll have to claim it from the government. You will only be able to claim statutory redundancy and not contractual redundancy payments.

If your employer is insolvent, depending on your situation, you may be able to apply to the government for:

  • a redundancy payment
  • holiday pay
  • outstanding payments like unpaid wages, overtime and commission
  • money you would have earned working your notice period

Close up of calculator calculating redundancy pay

In order to apply to the government for payment, you must be an employee (with two years continuous employment with that employer) and a UK or EEA national (or a foreign national with permission to work in the UK. Please check for changes after Brexit). If you’re not eligible, perhaps because you’re not an employee but a freelance or contractor, you will need to register as a creditor and different rules will apply.

An employee can apply to the government as soon as they’ve been made redundant, but they must apply within six months. The insolvency practitioner dealing with your employer will give you a case reference number (a CN number). It’s vital that you make a note of this, as you cannot claim without your CN number.

Payments are made from the National Insurance fund up to a set maximum. It can normally take up to six weeks in order for you to receive payment. If you are eligible to claim any state benefits, the amount you are eligible to claim will be deducted from your redundancy payment – even if you haven’t actually claimed them.

What to do if you’re told you’re not entitled to a payment

There could be a number of reasons for this, and the Redundancy Payments Service will give you the reason. It’s possible that you may not receive the amount you expected. This may be because when they checked with your employer, you were not entitled to some of the money you claimed. If you disagree with the decision not to pay you, it is possible to bring a claim in the Employment Tribunal, but we would always recommend you take professional legal advice before doing so.

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Updates: For employers: Pay and pensions | Redundancies |
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