21 December 2022: As a company enters liquidation and where employees are made redundant there are usually monies owed to employees. During an insolvent liquidation, the employees become creditors for unpaid wages, holiday pay, pay in lieu of notice, redundancy pay and other outstanding amounts. Employees are able to make a claim for statutory entitlements; however, as the company is likely to be unable to pay these liabilities, employees can claim through the Government’s redundancy payments service.
The process for an employee that is on statutory maternity pay (“SMP”) is not quite the same when their employer enters an insolvency procedure. Until the day of insolvency, it remains the responsibility of the employer to pay all maternity payments. Once the company has formally entered insolvency, HMRC will cover the statutory maternity payments that are due to the employee.
However, if the insolvent company is unable to pay its employees (for example due to lack of funds) but is not yet in a formal insolvency procedure, then employees should contact HMRC disputes team on 0300 322 9422. If for some reason HMRC are unable to help, then you should contact the insolvency practitioner (once they are appointed) as soon as possible and request a claim form. If the insolvent business cannot be recovered, the assets of the business will be sold to repay creditors and the employees will become a preferential creditor of the company for part of their debt with the remainder being a non-preferential debt. This means that part of their claim will be paid before other categories of creditors including certain secured creditors.
If you find yourself in this position or similar and feel as though you require advice from BRI Business Recovery and Insolvency, please do not hesitate to contact one our helpful management team for a free initial consultation with no obligation. We will always assist where we can regardless of the outcome for us.