Making the decision to liquidate your company is one of the hardest you may ever make. At the very first sign that you may need to do so, it’s essential that you speak to an Insolvency Practitioner, to get clear advice and guidance, but also to protect yourself from future action.

Alongside the decision itself, if you have employees, you’ll be worried about the impact of your decision on them. One of the most important things you can do is ensure your staff are aware of their rights and the support available to them. 

Whilst we’re not Insolvency Practitioners, and cannot advise in this capacity, it may be helpful for you to be aware of the Redundancy Payment Scheme. It’s definitely a subject that should be on the agenda for your conversation with an Insolvency Practitioner, but here’s a summary of the scheme and how it could be helpful.

What is the Redundancy Payments Service?

The RPS is a government service that provides financial support to employees who lose their jobs due to their employer’s insolvency. Funded by National Insurance contributions, it ensures workers receive certain payments they’re owed when their employer can’t pay.

According to the latest Insolvency Service Annual Report, in 2023-2024 the RPS:

– Received 85,592 claims for redundancy payments

– Paid out a total of £494 million to affected individuals

– Processed claims in an average of just 10 days

These figures highlight the substantial support available to help employees get back on their feet after job loss due to insolvency.

What can Employees claim?

The RPS covers several types of payments employees may be owed:

– Redundancy Pay: Based on length of service, age, and weekly pay

– Unpaid Wages: Any outstanding wages owed 

– Holiday Pay: Payment for accrued but unused holiday

– Statutory Notice Pay: If proper notice wasn’t given

– Protective Awards: Compensation for lack of redundancy consultation

For example, in 2023 nearly 10,000 former Wilko employees received £53.7 million in redundancy and notice pay, with claims processed within 24 hours.

Practical tips for employees

As an employer, you can support your staff by sharing these tips:

– Apply as soon as possible to minimise financial hardship. This is the link they would start with.

– Keep all employment documentation safe and accessible

– Be prepared to provide detailed information about your employment

– Consider seeking free advice from organisations like Citizens Advice or ACAS

– Look into other available support, such as Universal Credit or Jobseeker’s Allowance

– Start job hunting immediately, but remember it’s okay to take time to process the situation

Supporting your team…

While insolvency is hugely challenging, clear communication about the RPS, after speaking to an Insolvency Practitioner, may provide some reassurance to your employees. Consider:

– Holding an information session about the RPS and claims process.

– Providing written guidance on steps to take.

– Offering emotional support or counselling resources.

– Assisting with job search efforts where possible.

By ensuring your team are well-informed about their rights and the support available through the RPS, it may lessen slightly some of the stress and uncertainty of the insolvency process.

And finally…

As mentioned above, if you think your business may struggle in the coming months, please don’t ignore the situation. 

As a Director, you have obligations that can cause serious future problems for you personally if you don’t address them promptly. Speak to us if you are concerned, and we can put you in touch with Insolvency Practitioners who can give you practical advice, help you protect yourself and give you the best advice for your specific circumstances.