Redundancy pay if company enters administration
Discussion
Hi guys,
I work for an London based AIM listed business. Things haven’t really been going great since COVID, a big chunk of staff have left and there is a feeling that the end is near. However, I have been with the company for 10 years and if I depart now, I might lose out on a chunk of redundancy pay.
My questions relate to a possible administration situation. My contractual notice period is 4 months.
Q1: is my understanding correct, that, if the company does go into administration, if they have enough funds, I will get my 4 months at full pay, which will be tax free as it is way under £30,000?
Q2: if the company goes into administration, and the administrators are of the view that the company doesn’t have enough funds to fully pay my contractual redundancy or even partially, am I right in thinking I should apply to the Redundancy Payment Service, from whom I can claim the following:
Statutory Redundancy Pay (not subject to tax)
Compensation for being made redundant is £571 for each full year you have worked at the company
Holiday Pay (subject to tax + NI)
Up to 6 weeks unused holiday pay (is that correct?)
Statutory Notice Pay (subject to tax + NI?)
Statutory notice pay works out as £571 for each full year of employment
Q3. In an administration, the first 14 days are deemed crucial. If you’re made redundant, you simply become a regular creditor, but if you’re retained beyond the 14 day period, you become a preferential creditor and get some priority to recover funds you might be owed. I’m being cynical, but is there a criteria which the administrator must use, or they can simply say “right, if we keep you, we shall have to pay you your contractual notice at £x,xxx a month, but if we rid of you now, we won’t have to, so put your coat on and p**s off, cheers!”
Q3. If I am able to find a job more or less immediately (I doubt I will as I work in a specialised niche), is the redundancy payment sum affected by this?
Any pointers greatly appreciated!
Thank you for taking the time to read this!
I work for an London based AIM listed business. Things haven’t really been going great since COVID, a big chunk of staff have left and there is a feeling that the end is near. However, I have been with the company for 10 years and if I depart now, I might lose out on a chunk of redundancy pay.
My questions relate to a possible administration situation. My contractual notice period is 4 months.
Q1: is my understanding correct, that, if the company does go into administration, if they have enough funds, I will get my 4 months at full pay, which will be tax free as it is way under £30,000?
Q2: if the company goes into administration, and the administrators are of the view that the company doesn’t have enough funds to fully pay my contractual redundancy or even partially, am I right in thinking I should apply to the Redundancy Payment Service, from whom I can claim the following:
Statutory Redundancy Pay (not subject to tax)
Compensation for being made redundant is £571 for each full year you have worked at the company
Holiday Pay (subject to tax + NI)
Up to 6 weeks unused holiday pay (is that correct?)
Statutory Notice Pay (subject to tax + NI?)
Statutory notice pay works out as £571 for each full year of employment
Q3. In an administration, the first 14 days are deemed crucial. If you’re made redundant, you simply become a regular creditor, but if you’re retained beyond the 14 day period, you become a preferential creditor and get some priority to recover funds you might be owed. I’m being cynical, but is there a criteria which the administrator must use, or they can simply say “right, if we keep you, we shall have to pay you your contractual notice at £x,xxx a month, but if we rid of you now, we won’t have to, so put your coat on and p**s off, cheers!”
Q3. If I am able to find a job more or less immediately (I doubt I will as I work in a specialised niche), is the redundancy payment sum affected by this?
Any pointers greatly appreciated!
Thank you for taking the time to read this!
Edited by Aliblahblah on Thursday 28th April 20:07
Pay in lieu of notice or pay during notice worked is deductible in the usual way. There is no tax free part to regular salary. The RPS will cover statutory redundancy payments. You can find an online calculator on the .gov website. It is not a straight payment per year of service but is tiered in age bands too and called at maximum statutory amounts.
Google “Redundancy payments service”; you’ll find lots of relevant info on the process and it will help you to calculate any potential entitlement.
In terms of this 14 days: this isn’t true.
Assuming the company becomes insolvent and you’re made redundant at some point following the appointment of an administrator / liquidator, you would be paid by the RPS for your statutory entitlement and they then claim against the company (their claim ranks as preferential).
Anything contractual you’re owed above the statutory limits, would rank as an unsecured claim.
Some unsolicited advice:
I don’t know what you do, but I’d personally be tempted to jump ship now.
I’ve worked in insolvency for a long time and it’s never an easy or straightforward process.
Appointments normally occur just prior to the payroll run, so you wouldn’t get paid on time and will have to wait weeks for the RPS to pay you.
Also, you’ll then be potentially competing against loads of your former colleagues when applying for new roles.
Finally, while it’s hard to walk away from a potentially significant payout, unless your company is total dog s
te, it’s more likely it would be sold - the businesses that usually buy underperforming / distressed companies…. I wouldn’t want to work for them.
In terms of this 14 days: this isn’t true.
Assuming the company becomes insolvent and you’re made redundant at some point following the appointment of an administrator / liquidator, you would be paid by the RPS for your statutory entitlement and they then claim against the company (their claim ranks as preferential).
Anything contractual you’re owed above the statutory limits, would rank as an unsecured claim.
Some unsolicited advice:
I don’t know what you do, but I’d personally be tempted to jump ship now.
I’ve worked in insolvency for a long time and it’s never an easy or straightforward process.
Appointments normally occur just prior to the payroll run, so you wouldn’t get paid on time and will have to wait weeks for the RPS to pay you.
Also, you’ll then be potentially competing against loads of your former colleagues when applying for new roles.
Finally, while it’s hard to walk away from a potentially significant payout, unless your company is total dog s
te, it’s more likely it would be sold - the businesses that usually buy underperforming / distressed companies…. I wouldn’t want to work for them. Sorry, just on your final point:
Yes, you are expected to minimise the potential claim - they will ask you to sign on for jobseekers (or whatever it’s called now) and deduct that amount from your claim (regardless of whether you do or not).
If you get another higher paying job, this will also be deducted (from memory, this is just deducted from your notice entitlement - but I could well be mistaken on this point).
Yes, you are expected to minimise the potential claim - they will ask you to sign on for jobseekers (or whatever it’s called now) and deduct that amount from your claim (regardless of whether you do or not).
If you get another higher paying job, this will also be deducted (from memory, this is just deducted from your notice entitlement - but I could well be mistaken on this point).
Once the company is in administration you only get statutory redundancy I believe.
If you know enough about the business you could be useful to the administrator and come to some agreement whereby they pay you for consultancy services.
About 14 years ago I worked for a company that went into adminstration and they needed to claim a large amount of money from the credit card processing company. I had knowledge of where that data was and how to carry out any reconciliations. That got me a 2 month stint at a daily rate.
If you know enough about the business you could be useful to the administrator and come to some agreement whereby they pay you for consultancy services.
About 14 years ago I worked for a company that went into adminstration and they needed to claim a large amount of money from the credit card processing company. I had knowledge of where that data was and how to carry out any reconciliations. That got me a 2 month stint at a daily rate.
If it goes into adminstration,ACAS,are the people to contact,also depending on number employed,protective award is claimed to make up for lack of consultation,I was an employee and unsecured creditor of firm that went bust July '19, finished getting money last summer,all straightforward,lol which AIM firm,just so I don't chuck more money away ?
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