What if my employer enters liquidation?

Due to the nature of insolvency, it’s common for news of redundancies to be delivered with little to no warning. Being made redundant as part of insolvency can be a hugely distressing time for you and your family, leaving you with many questions. What does this all mean for you and how can you get the money you’re owed if your employer enters liquidation?

What’s an insolvency practitioner?

If your employer is entering liquidation, the directors are likely to have engaged a licensed insolvency practitioner to help them with the formalities of placing the company into liquidation.

Liquidation is a legal process governed by UK law. Only licensed insolvency practitioners or Official Receivers are allowed to handle the affairs of insolvent businesses in the UK.

The legal process to commence a liquidation takes around two to three weeks. In the lead-up to a liquidation it’s common for the company to cease trading.

Usually, the insolvency practitioner will become the liquidator of the company. For information about the role of a liquidator, please see our brochure entitled ‘What is liquidation?’

Although the insolvency practitioner is likely to inform you of your redundancy, their role is also to help you recover any money that you’re owed. You may be entitled to arrears of wages (time that you’ve worked but haven’t been paid for), holiday pay, notice pay and redundancy pay. As the company is insolvent, it’s unable to pay this to you, therefore, the Redundancy Payments Service (RPS) will step in to make sure that you’re not out of pocket. Other expenses and tribunal awards can also be claimed from the RPS.

Redundancy Payments Service (RPS): What is it?

The RPS is a government department dealing with employee claims when a company isn’t able to pay its employees. The RPS can’t accept any claims until the company is in liquidation and they aim to process the claims within six weeks of receiving the claim. The RPS will replace you as a creditor in the liquidation and will pay you what you’re owed.

The purpose of the RPS is to make sure that employees aren’t left without payment for their services and that you receive any redundancy pay that you’re entitled to, within certain statutory limits.

The RPS will need you to complete a form online, providing details of your claim. The liquidators will also have to submit information regarding the claims from the company records.

When a company is placed into liquidation, the liquidator will provide employees with an RPS factsheet which will include instructions on making a claim online as well as your reference number for the claim.

To read more about the different types of claims, including redundancy pay, and how much you’re able to claim, please see our brochure entitled ‘Liquidation: What it means for employees’.

Need help?

If you’re an employee of a liquidated company, you should contact the liquidator in the first instance to discuss your claim or queries.

If you believe that your employer is insolvent and have any queries or concerns, please get in touch with our Insolvency & Recovery team. We have two licensed insolvency practitioners as well as insolvency managers who can offer advice and help. Call us on 0330 024 0888 or email enquiry@larking-gowen.co.uk.

Sebastian Hall