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Ben Jones
Ben Jones, UK Lawyer
Category: Employment Law
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Experience:  Qualified Employment Solicitor - Please start your question with 'For Ben Jones'
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If I have accepted voluntary redundancy whilst my company is

Customer Question

If I have accepted voluntary redundancy whilst my company is solvent and then whilst working my notice period, the company goes into administration, is my redundancy payment protected?
Submitted: 10 months ago.
Category: Employment Law
Expert:  Ben Jones replied 10 months ago.

Hello, my name is***** am a qualified lawyer and I will be assisting you with your question today.

Expert:  Ben Jones replied 10 months ago.

Have you received written confirmation of your redundancy package? Please can you also tell me how long you had worked there for? Thank you

Customer: replied 10 months ago.
Termination of employment letter received with settlement amount and termination date. Worked there 9 years so relatively long notice period. Termination date at end of month but have been asked to stay on for a few months. In deciding whether to accept, wanted to check what would happen if they went into administration before they paid the settlement amount before end of extended period. Hope that makes sense.
Expert:  Ben Jones replied 10 months ago.

OK thank you, ***** ***** it with me. I am in court today so will prepare my advice during the day and get back to you at the earliest opportunity. There is no need to wait here as you will receive an email when I have responded. Thank you.

Expert:  Ben Jones replied 10 months ago.

Sorry can I just check if this was just a statutory redundancy amount or an enhanced one?

Customer: replied 10 months ago.
Thanks Ben. Just re read my last message. Penultimate sentence should read "In deciding whether to accept, wanted to check what would happen if they went into administration before they paid the settlement amount AT end of extended period." Look forward to receiving your advice.
Customer: replied 10 months ago.
Was enhanced. Thanks
Expert:  Ben Jones replied 10 months ago.

If your employer goes insolvent before the amount is paid then that would become a debt of the company and you will be a creditor. So you will join the queue of creditors in a certain order to try and get anything that is left over in terms of money and assets that may be distributed to its creditors. Usually it is rare for everyone to get what they are owed and they may get a few pence to every pound although it depends on what they actually have left.

If the company is unable to pay its debts and you end up with nothing, then you will have protection under the National Insurance Fund. Sadly they would not cover enhanced redundancy payments and only the statutory amount will be covered. So the risk is that you lose out on the enhanced portion of this payment.

This is your basic legal position. I have more detailed advice for you in terms of the protection you get under the NIF, which I wish to discuss so please take a second to leave a positive rating for the service so far (by selecting 3, 4 or 5 stars) and I can continue with that and answer any further questions you may have. Don’t worry, there is no extra cost and leaving a rating will not close the question and we can continue this discussion. Thank you

Ben Jones and other Employment Law Specialists are ready to help you
Customer: replied 10 months ago.
Thanks Ben. Suspected this would be the case and the enhanced payment would not be protected. Lowest risk option therefore is to take the payment at end original notice period whilst company still solvent. May not go into administration but clearly not worth risk of losing significant amount if there is any chance.
Customer: replied 10 months ago.
Incidentally, how high up the list of creditors would I be as a staff member already granted redundancy? Presumably if they were settling debts and I was high up this list, I could end up receiving the full amount?
Expert:  Ben Jones replied 10 months ago.

you are about third on the list after costs of the insolvency and secured creditors like banks. However, even on that list you have limits on what you can claim so the full payment may still not be covered. This is more of a corporate law matter though soc annot give out too many details as not my area of law.

That may indeed be the least risky option. If you do end up finding they go insolvent whilst still owing you money, the first step would be to contact the company’s insolvency practitioners (administrator, liquidator, etc.) to check if it is likely for any money or assets to become available for distribution amongst the company's creditors, including their employees.

If it appears unlikely that the company will be able to cover these payments, employees will also have additional rights to claim through the National Insurance Fund (NIF). The following debts, if owed to employees by an insolvent employer, can be recovered from the NIF:

· Up to 8 weeks' arrears of pay (up to the current maximum statutory limit on a week's pay) less basic rate tax and NI contributions.

· Up to 6 weeks' holiday pay (up to the current maximum statutory limit on a week's pay) which accrued in the 12 month period ending on the date of the insolvency, less basic rate tax and NI contributions.

· Statutory notice pay (up to the current maximum statutory limit on a week's pay) less basic rate tax.

· Statutory redundancy payment less any amount already paid by the employer

Any claims in excess of the above limits should be claimed from the insolvent employer in the usual way, such as through the insolvency practitioner or through court.

To be able to claim from the NIF, the following conditions must be met:

· Only employees can claim, therefore the self-employed, agency workers, etc are not covered

· The employer must have been made officially insolvent

· The employee’s employment must have been terminated

Assuming the above criteria have been met, the procedure for claiming requires the application to be made to the Redundancy Payment Office responsible for the employer’s area, by using form RP1. To get a copy of the form and for further details, you can contact the Redundancy Payments Helpline on 0845(###) ###-####

Customer: replied 10 months ago.
Thanks Ben. Very helpful and confirmed my suspicions. Will take the money as originally planned and negotiate an alternative working arrangement with them if they still wish to retain my services. Thanks again for your help today.
Expert:  Ben Jones replied 10 months ago.

You are most welcome, all the best

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