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Can employees and directors make claims to the Redundancy Payments Service?

If a company goes into a formal insolvency process, like CVL, employees and directors may be able to claim various entitlements from the RPS if the company cannot afford to pay. These could include arrears of wages, notice pay, unpaid holiday and redundancy

Employees and directors should be able to make a claim to the RPS if they can show that they were employed by the company i.e on the payroll and deductions taken for National Insurance and tax. Directors in particular need to show that they worked for the company at least part time and had a role in the day to day running of the company. Directors will usually be asked to provide a copy of a contract of employment, payslip, P60 or other evidence that they were employed.

Full details of what can be claimed are found on the Government’s website but to summarise:

  • Redundancy (if you have been employed continuously for at least two years by the company that is insolvent
  • Up to 8 weeks’ wages
  • Up to 6 weeks’ unpaid holiday
  • Statutory notice pay
  • Unpaid pension contributions (this may be dealt with by a Liquidator)
  • Unfair dismissal (basic award)
  • Loss of notice

It is worth remembering that successful claims are not guaranteed, especially if employees and directors have been taken over by a new company that has purchased some or all of the insolvent company’s business.

Claims can only be made online via a special government website and claimants will need a case reference (also known as a CHAMP reference) which they can only get from the Liquidator or proposed Liquidator and claims will only be processed once the company is in liquidation.

As the money claimed comes from the National Insurance fund, there is a cap of £479 per week on what they will pay, so if claimants are still owed money after a successful claim to the RPS, the balance will become a claim in the liquidation of the company. In the event sufficient assets are recovered in the liquidation to enable a dividend to creditors, claimants will receive a part payment of the unpaid balance of their claim.

Please note that dividends are not paid in all cases and even when they are, it can often take many months for a Liquidator to be in a position to make a payment. 

At The Liquidation Advice Centre, we can assist directors and employees in the process of making their claim from start to finish.