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08/11/2010 14:11:05 www.clicklegalservices.co.uk Administrator Posts: 374

What does this mean and what can I do? Whilst a detailed definition of insolvency is not attempted here, essentially, an insolvency situation arises where an employer has insufficient funds to pay their debts – and wages due and owing to an employee is, of course, a debt. There is some protection available to employees – albeit, quite limited: Wages are a “preferential debt”. This means that they rank near to the top of the list of creditors which fall due to be paid under the Insolvency Act 1986. So, when any assets are sold off by the liquidator/trustee in bankruptcy, hopefully, if there are sufficient assets, then the employee will be near to the top with a view of being paid; The state can step in and can guarantee payment of certain sums due from employers – and also to make up any unpaid employer pension contributions. The main issue in reality though, is going to be (in the present climate) redundancy payments. If the employer has failed to pay in full or in part: A statutory redundancy payment; A payment agreed to be made by the employer for a statutory redundancy payment within a compromise agreement; A redundancy payment agreed to be made as part of a collective agreement. Then the employee can apply (generally) within 6 months to the Secretary of State for Work and Pensions/Redundancy Payments Office for a payment. Other sums (assuming the case has to go to an Employment Tribunal firstly – not all need to) are payable as well, such as a basic award for unfair dismissal, certain pay arrears, notice pay, holiday pay. So, for example, if you are seeking an Order from the tribunal that you were say, unfairly dismissed – but also want to make a claim against the Secretary of State for a redundancy payment, then you should do both within the relevant time limits. What happens if the Secretary of State does not pay – or disputes liability? Again an separate application – within 3 months of the date of the refusal by the Secretary of State – can be made to the Employment Tribunal. There is an excellent leaflet available at http://www.insolvency.gov.uk/pdfs/guidanceleafletspdf/guideforemployees.pdf

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