If your employer goes bust, you have legal rights to claim pay you’re owed and may be entitled to redundancy. Here’s what happens and what you need to do.
Types of Insolvency
The process depends on what kind of insolvency your employer enters:
| Type | What It Means | Your Job |
|---|---|---|
| Administration | An administrator tries to rescue the business or get a better deal for creditors | May continue — the business may be sold |
| Liquidation | The business is being closed and assets sold | You’ll be made redundant |
| Company Voluntary Arrangement (CVA) | The company agrees a payment plan with creditors | Usually continues with changes |
| Receivership | A secured creditor appoints a receiver to recover their debt | Depends on what the receiver decides |
What Happens to Your Job
If the Business Is Sold (TUPE Transfer)
If the business or part of it is sold as a going concern:
- TUPE regulations protect you — your job transfers to the new owner
- Your terms and conditions are preserved (pay, hours, benefits)
- You cannot be dismissed just because of the transfer
- Your continuity of employment is maintained
If the Business Closes (Liquidation)
If there’s no buyer and the business is wound up:
- You’re made redundant — your employment ends
- You’re an unsecured creditor of the company (you’re owed money)
- The insolvency practitioner should provide information about claiming
What You Can Claim
From the National Insurance Fund
The government’s National Insurance Fund pays certain employee claims when an employer is insolvent. Claims are handled by the Redundancy Payments Service (part of the Insolvency Service).
| Entitlement | Maximum Amount |
|---|---|
| Unpaid wages | Up to 8 weeks, max £643/week |
| Holiday pay | Up to 6 weeks, max £643/week |
| Statutory notice pay | Up to 12 weeks (based on service), max £643/week |
| Statutory redundancy pay | Based on age and service, max £643/week |
| Unpaid pension contributions | Employer’s share of contributions |
Statutory Redundancy Pay
If you have at least 2 years’ continuous service:
| Age | Per Full Year of Service |
|---|---|
| Under 22 | Half a week’s pay |
| 22–40 | One week’s pay |
| 41+ | One and a half weeks’ pay |
Maximum 20 years counted. Weekly pay capped at £643 (2024/25). Maximum statutory redundancy pay is £19,290.
What You Won’t Get From the NIF
- Pay above the statutory cap (£643/week)
- Contractual redundancy pay above statutory levels
- Commission or bonuses (unless they count as “wages”)
- Benefits in kind (car, health insurance)
For amounts above the statutory cap, you’re an unsecured creditor — you can register a claim with the insolvency practitioner, but recovery is uncertain.
How to Claim
Step 1 — Get Your Documents Together
Gather:
- Payslips — as many recent ones as possible
- Employment contract — confirms start date, terms, pay
- P45 — the insolvency practitioner should issue this
- Any correspondence from the insolvency practitioner
- Bank statements — showing salary payments (if payslips are unavailable)
Step 2 — Submit Your Claim
The insolvency practitioner should give you an RP1 form and information about claiming. You can also claim online through the Redundancy Payments Service.
- Claims should be submitted within 6 months of the insolvency date
- The insolvency practitioner will verify your employment details
Step 3 — Wait for Payment
- Processing typically takes 3–6 weeks after submission
- Payments are made directly to your bank account
- You’ll receive a breakdown of what’s been paid
What Happens to Your Pension
Defined Contribution (Workplace Pension)
Your pension pot is safe:
- It’s held separately from your employer in a trust or with a pension provider
- The insolvency practitioner and creditors cannot access it
- Any unpaid employer contributions can be claimed from the National Insurance Fund
- Your pot transfers to or stays with the pension provider
Defined Benefit (Final Salary)
If the pension scheme is underfunded:
- The Pension Protection Fund (PPF) assesses the scheme
- If you’ve reached pension age: 100% of your pension is protected
- If you haven’t: 90% of your pension, subject to a cap (~£41,000/year at 65)
- The PPF pays your pension directly
Your Rights During the Process
Right to Information
- The insolvency practitioner must tell you what’s happening
- You should receive information about claiming within 14 days
- You’re entitled to know whether the business is being sold or closed
Right to Consultation
If 20+ employees are being made redundant:
- 20–99 employees: At least 30 days’ consultation
- 100+ employees: At least 45 days’ consultation
- If the employer fails to consult, you can claim a protective award (up to 90 days’ pay)
TUPE Rights
If the business is sold:
- You must be informed and consulted about the transfer
- Your terms cannot be changed because of the transfer
- If you’re dismissed because of the transfer (not for an economic, technical, or organisational reason), it’s automatically unfair dismissal
What to Do Immediately
- Don’t stop going to work unless you’re told to — the administrators may need you
- Keep all documents — payslips, contract, letters from the insolvency practitioner
- Register with the Redundancy Payments Service as soon as possible
- Claim benefits — you may be entitled to Universal Credit, Jobseeker’s Allowance, or New Style JSA
- Check your pension — log in to your pension provider to confirm your pot is intact
- Don’t sign away rights without advice — if the business is being sold, get advice before agreeing to any changes
Where to Get Help
- Redundancy Payments Service: 0330 331 0020
- ACAS: Free employment advice — 0300 123 1100
- Citizens Advice: Help with benefits, debt, and next steps
- Jobcentre Plus: Register for benefits and job-seeking support
- MoneyHelper: Free guidance on pensions and finances