Your employer goes into administration. What are your rights?

The recent news that British Steel has slipped into compulsory liquidation and appointed the Official Receiver to oversee and run the business has focused employees’ minds on the possibility that the company is wound up and redundancies follow. In those circumstances, what are the rights of the employees?

If an employee has worked for the company for 2 or more full years (known as “continuous employment”), they are entitled to redundancy pay. The statutory minimum is:
• half a week’s pay for each full year the employee was under 22
• one week’s pay for each full year the employee was 22 or older, but under 41
• one and half week’s pay for each full year the employee was 41 or older.

Length of service is capped at 20 years. Weekly pay is capped at £525 and so the maximum statutory redundancy pay an employee can get is £15,750.

It is open to British Steel to pay more, but given its parlous financial position (it was not in a position to appoint administrators due to lack of funds), that is unlikely.

But what is the position if British Steel does not have the funds to pay?

If there are insufficient funds available to make redundancy payments, an employee can claim payments from the National Insurance fund up to a set maximum to cover redundancy payment, outstanding payments like unpaid wages, overtime and commission, accrued holiday pay and notice pay. Claims must be made to the Insolvency Service.

It is a small comfort to an employee who has just lost their livelihood that even if British Steel cannot pay their outstanding financial entitlements, that there is a backstop which effectively guarantees this.

Meaby & Co are lawyers experienced in all employment issues. Should you require advice on any aspect of employment law, please contact Chris Marshall on 0207 703 5034 or cmarshall@meaby.co.uk.