Your rights if your employer is made insolvent

Last updated: 28 May 2021

An employer is insolvent if it cannot pay its debts as they fall due. It may also be insolvent if its liabilities exceed its assets.

The information in this article is intended for general guidance only. Insolvency is a complex area and your rights may depend on the precise circumstances of your employer’s situation, particularly where there is potential for a TUPE transfer. We therefore recommend that you seek advice on your rights if your employer is facing insolvency.

How your employer’s insolvency may affect your employment

If your employer enters an insolvency process this does not necessarily mean your employment will be terminated. The possible outcomes will depend on the type of insolvency process.

You may be kept on in employment, you might be made you redundant, or it is possible that your employment may transfer to a new employer under TUPE (e.g. if a buyer is found for some or all of the insolvent business and TUPE applies to the purchase) or even if TUPE does not apply, you may be offered new employment with the buyer. See section 3.10 for information about TUPE.

The potential impact on your employer if your employer is insolvent will depend on the precise situation and the type of insolvency proceedings that your employer is facing. There are three main types of insolvency proceedings – liquidation, administration or a company voluntary arrangement.

The key features in respect of the potential impact on employment are set out below.


An ‘administrator’ is an insolvency practitioner who is appointed to manage an insolvent company’s affairs, business and property. An administrator aims to rescue the company and potentially sell it while it continues to trade.

The administrators who run the insolvent company may try to find a buyer for the company. If a buyer is found, employees might transfer to the buyer under TUPE and be kept on in their current roles, but it is also possible that there will be redundancies.

The appointment of the administrator is not a change of employer and employment contracts do not automatically end. Your continuity of service will therefore be preserved. If the business is to be sold and TUPE applies, you would retain continuous employment. However, it is common for administrators to make redundancies if the company no longer has sufficient funds to continue paying employees.

Certain payments including redundancy, statutory notice and an amount of unpaid wages may be recoverable from the National Insurance Fund (NIF) – see below for more.


A ‘liquidator’ is another type of insolvency practitioner. There are two types: Compulsory liquidation where the court orders the company to be wound up; and Voluntary liquidation where the company or its directors agree to wind up the company (which may be solvent or insolvent).

A company that goes into liquidation will likely stop trading immediately on or after the liquidator’s appointment (if not before). The liquidator aims to get the best outcome for the company’s creditors which might not always be to maintain employees in their current roles.

In compulsory liquidation (ordered by the court), all employee contracts are terminated automatically with immediate effect from the date of publication of the winding up order, unless the liquidator agrees with you for your employment to continue, either under your existing contract or under a new contract with the liquidator. In both cases, your continuity of service is normally preserved.  

In voluntary liquidation, employment contracts may not be affected. However, the liquidator may make redundancies if they believe it is best for the company.

Certain payments including redundancy, statutory notice and an amount of unpaid wages may be recoverable from the National Insurance Fund (NIF) – see more below.

Company voluntary arrangement (CVA)

CVA is a form of voluntary insolvency whereby the company’s directors retain control of the company but an insolvency practitioner is appointed to supervise the company’s compliance with the CVA terms.

In order for the company to meet its obligations in the CVA and keep its creditors happy, the company may have to make decisions involving its workforce. This may result in redundancies or re-deployment to meet business needs.

CVAs do not automatically affect employment contracts because, as with administration, they aim to have the company continue to trade.  

Certain payments including redundancy, statutory notice and an amount of unpaid wages may be recoverable from the National Insurance Fund (NIF) – see more below.

I don’t know what is going on with my employer’s insolvency

If your employer has not told you what is happening there are several places you can find information:

  1. If your employer is a company, check the filings at Companies House.
  2. You can also find details of insolvent companies and individuals using the Insolvency Service.
  3. Check the media for any reports about your employer’s financial status, but ensure you use trustworthy resources.
  4. Get in touch with the Liquidator or Administrator to find out what is happening.

What to do if you lose your job

If you unfortunately lose your job as a result of your employer’s insolvency, there are options for recovering money that you may be owed. Some types of pay you may be owed include the following:

  1. Redundancy pay;
  2. Holiday pay;
  3. Statutory or contractual notice pay;
  4. Pension contributions;
  5. Family pay such as maternity pay;
  6. Other amounts such as unpaid wages, commissions or bonuses.

The following sections will explain whether and how you can claim for the above types of money and offer answers to some frequently asked questions.

Claiming redundancy payments owed

If your employer makes you redundant, you may find that they are unable to pay your statutory or contractual redundancy pay. Where they are insolvent, or where they are solvent but have failed to pay and you have made all reasonable steps to recover payment (which would normally include a tribunal claim) you may be able to claim your statutory redundancy pay from the National Insurance Fund (NIF) as part of state-guaranteed funds, subject to eligibility criteria.

You must be an employee to be able to claim redundancy pay, have at least 2 years’ continuous service and you must make the claim within 6 months of the date of your dismissal for redundancy.

Your employer or the insolvency practitioner will provide you with a RP1 factsheet and ‘CN’ (case reference number) if you are made redundant. The exact amount of statutory redundancy pay owed to you will vary depending on your personal circumstances. You can calculate the pay using this Government calculator.

The Government website provides a service where you can claim redundancy pay owed to you if you were an employee of the insolvent business.

Please note that you will need various information in order to complete the form and these are listed at the Government application link. They include your ‘CN’, National Insurance number, bank account and contact details, and details of your employment and redundancy.

Claiming for unpaid wages

If your employer owes you wages and, you may be able to recover these from state-guaranteed funds, subject to eligibility requirements. Employees/workers can claim up to a maximum limit of 8 weeks’ arrears of pay from the National Insurance Fund (NIF) capped at £544 per week (max £4,352) (as at April 2021).

Only employees or workers can claim, and you will only be entitled to money that you are owed under your employment contract.

If you were a self-employed contractor of the business, you will not be able to make any claims to the National Insurance Fund. Instead you will need to claim from the insolvent business as a creditor, and there is another process to follow.

Claiming for holiday pay

You may be able to claim holiday days owed to you that you did not take or holiday days that you took but for which you were not paid. You can only claim for holidays that you took in the 12 months before your employer became insolvent. Employees/workers can claim up to 6 weeks’ holiday pay, capped at £544 per week (total £3,264) (as at April 2021).

The NIF may again allow you to recoup some of the debts owed to you by your insolvent employer, subject to eligibility requirements.

You pay income tax and National Insurance on your holiday payment and you may be able to claim a tax refund if you have paid too much.

Claiming notice pay

You are entitled to a paid notice period when you are made redundant, even if it is not in your contract. Lost notice pay claims can be made when you have not been paid for your notice period because your employer is insolvent, including if you did not work your notice period.

You are entitled to claim for your ‘statutory minimum notice’ entitlement. Under law, you are entitled to one week’s notice after one month’s employment, rising to two weeks after 2 years’ employment and increasing by a further week each year up to a maximum of 12 weeks.  

The NIF may again allow you to recoup some of the debts owed to you by your insolvent employer, subject to eligibility requirements. Employees can claim up to 12 weeks’ statutory notice pay, capped at £544 per week (max £6,528) (as at April 2021).

Please note that before you make this application, you will need to fill in the government application, even if you are not owed any money from your employer. You then need to complete another application which lets you claim for lost notice pay.

If your employment contract entitles you to notice which is greater than statutory notice, you may be able to make a claim against your employer company for the balance. However, this will be an unsecured claim against the insolvent company and the likelihood of recovery the money is low – see more below.

Claiming pension

If you are missing contributions to your pension, the first step to take is to contact the insolvency practitioner or official receiver dealing with your former employer.

The Pension Protection Fund may also be able to assist you if you have a defined benefit pension scheme which has been affected by your employer’s insolvency. You can find more information on this on their website.

Claiming statutory payments

Generally, liability for statutory payments passes to HMRC on the employer’s insolvency, who will continue to pay them for the full term. However, you will need to check your eligibility as individual circumstances may vary.

The best way to get more information on this is to speak to your employer or the relevant insolvency practitioner in the first instance. If they cannot help you further, you can contact the Statutory Payment Dispute Team which is part of HMRC.

It will also be useful to contact the insolvency practitioner dealing with your former employer in case they have any information which may be useful.

After making your application

It can take 6 weeks or longer to receive the payment. The information you provide is checked against your employer’s records and you will only receive a payment if those records reflect that you are owed money.

Please note that any benefits that you are eligible to claim will be deducted from your statutory notice payment (even if you did not claim them). It is therefore important to check your benefits entitlement as a first port of call.

If your application is rejected, you should contact the Redundancy Payments Service who will explain why. If you disagree, you may also make a claim to the Employment Tribunal, claiming against the Secretary of State for Business Energy and Industrial Strategy and your former employer as ‘respondents’.

What about other payments not covered by NIF?

If there are other monies that are owed to you by your employer and the above methods cannot recover them, you have other options. You may have a potential claim against your employer for any additional notice pay you may be owed in your employment contract (above the statutory amount which you can claim via the process above).

Where you are claiming a debt or unpaid amounts under your contract from your employer, this can be made as a claim directly to the insolvent company. Where the amounts in dispute are not clear, or result from a claim, you may need to obtain a finding from the Employment Tribunal or court. See below for the types of claims for which you will need to obtain a judgment before being able to claim in the insolvency.

You may also be able to claim unlawful deduction of wages, e.g. if your employer is still trading but you are not being paid.

However, please note that some types of insolvency such as compulsory liquidation may also include a restriction on legal proceedings. This means you cannot claim against your employer until this restriction has been lifted by the court. In an administration, proceedings are also restricted, but can continue with the permission of the administrator.

It is also important to remember that even if you are successful in your claim, most awards in your favour will rank as ‘unsecured claims’ against your employer. This means they are roughly second-to-last in the order of priority, below other creditors who are owed money by your employer. This means that full recovery of your award may be unsuccessful.

However, some sums that you might claim may be considered ‘preferential debts’ which are easier to recover. One example of a preferential debt are the wages or salary owed for the four-month period prior to insolvency proceedings, subject to a maximum of £800.

You should consider taking advice on the above prior to starting a claim, to ensure you have the full picture of what you can and cannot achieve.

Are there any other claims I might have?

You can make a claim to the Employment Tribunal in the following scenarios:

  • if you were dismissed unfairly (unless your employer is going through compulsory liquidation, as your employment is terminated automatically by appointment of the liquidator);
  • if your employer did not hold a consultation about your redundancy and your employer had proposed 20 or more employees’ redundancies in one establishment within a period of 90 days;
  • if your employer failed to observe its duty to inform or consult under TUPE (see section 3.10); or
  • if you disagree with the outcome of your applications to the Government under the above sections 3.1 to 3.4.

You will be claiming against the Secretary of State for Business Energy and Industrial Strategy and your former employer as ‘respondents’. For claims about non-payment by the Government of amounts you feel are due to you from the state guaranteed National Insurance Fund you will just be claiming against the Secretary of State for Business Energy and Industrial Strategy.

What if my job is transferred to another employer?

The Transfer of Undertakings (Protection of Employment) Regulations 2006 or TUPE is often relevant in an insolvency context. TUPE usually protects employees by automatically transferring their employment contracts and preserving their continuity of service if their employer transfers the business or the part of the business in which they were employed to another entity, subject to eligibility requirements. TUPE will apply to employees who are ‘assigned’ or essentially dedicated to the transferring business.

Similarly, dismissal by reason of the transfer will automatically be unfair for employees who have two or more years’ service. However, TUPE offers greater flexibility in some respects to the transferees (i.e. the new employer) of insolvent businesses.

Where the employer is in administration or under a CVA, some ‘normal’ TUPE rules apply including that employees will automatically transfer to the transferee and also receive enhanced unfair dismissal protection for employees with 2 or more years’ continuous service.

However, a key difference from ‘normal’ TUPE rules is that certain liabilities relating to your employment will not transfer to the transferee, and you will instead need to claim them from the NIF. These particular liabilities include arrears of pay, holiday pay and statutory notice pay reflecting the payments that you can recover from the NIF as detailed in section 3. If there are any sums due to you which are not covered by the NIF (i.e. they are a different type of debt or they exceed the maximum amounts covered by the NIF), these debts will transfer to the transferee.

However, where the employer is in liquidation, the ‘normal’ TUPE rules do not apply in that employees do not automatically transfer to the transferee and dismissals due to the transfer are not automatically unfair.

In all insolvency situations, the TUPE obligations continue to require your old employer and the transferee to inform and consult ‘appropriate representatives’ of the employees. These duties continue regardless. They must inform employees that the transfer will occur including the legal, economic and social implications of the transfer and detail any measures which they envisage might be taken. Sometimes, they also need to consult with recognised trade unions or elected employee representatives. Please note however that there are relaxed rules for businesses with fewer than 10 employees and where there are special circumstances (such as insolvency), the employer or the relevant insolvency practitioner is expected to as much as it can to comply with the duty but it will not be penalised if it cannot fully comply.

If your employer and the transferee do not observe their informing and consulting obligations, then you may be able to make a claim to the Employment Tribunal. Please note the comments in section 3.9 about possible restrictions on legal proceedings against your insolvent employer and the possibility that you may not fully recover your award.

I heard that the business has been saved but I’ve been told I don’t have a job

If your employer is in administration and the business has been sold, but you have been told you do not have a job, then you might have a claim against the new owner. However, this will depend on the precise circumstances.

TUPE applies where there is a transfer of a business or part of a business to a new owner, so the first question to understand is what exactly has been sold and whether your employment was ‘assigned’ to any part of the business which has been sold. If it was and you have not been taken on, then you may have a claim for automatic unfair dismissal against the new owner (if you have two or more years’ service).

If you were not assigned to the part of the business which has been sold then you are likely to be redundant and would not unfortunately be able to claim against the new owner. Your claims would be against your insolvent employer.

TUPE can be complex and we recommend that specific advice is taken if you think this may be relevant.

Frequently asked questions

Am I eligible for benefits?

The Government website has a helpful calculator where you can see the benefits you might be eligible for. It is important to check because any payment made under the below applications below may be reduced by any benefits you are entitled to. Also see our articles on Benefits and Tax Credits.

How do I claim for redundancy pay?

You can use the Government service to claim money owed to you by your employer.

How do I claim statutory notice pay, even if I did not work my notice period?

You can claim up to 12 weeks’ statutory notice pay, capped at £6,528.

You first need to complete the form detailed in the Government service, even if you are not owed money. You then make a separate application here.

How do I recover unpaid monies e.g. wages, overtime and commission?

You can claim up to 8 weeks’ arrears of pay, capped at £4,352. You can use the Government service to claim money owed to you by your employer.

What if I am asked to continue working after the insolvency but am then made redundant?

You may be eligible to claim for redundancy pay and other money you are owed. However, you cannot claim holiday pay, wages, bonuses or commission that you are owed between the day of the insolvency and the day you were dismissed from the National Insurance Fund. This should be payable by the insolvency practitioner.

What if I am transferred to a new employer?

So long as you were transferred after your employer became insolvent, you can apply for outstanding payments such as holiday pay, wages, commission and bonuses up to certain limits.

How do I recover holiday pay?

You can claim up to 6 weeks’ holiday pay, capped at £3,264 through the Government service.

What happens to my pension?

Check whether your contributions have been credited to your pension and speak to the Pension Protection Fund.

Can I recover statutory amounts like maternity pay, paternity pay, adoption pay and shared parental pay?

Liability for these payments passes to HMRC on the employer’s insolvency, who will continue to make them for the full legal term. You can contact the Statutory Payment Dispute Team which is part of HMRC.

This advice applies in England, Wales and Scotland. If you live in another part of the UK, the law may differ. Please call our helpline for more details. If you are in Northern Ireland you can visit the Labour Relations Agency or call their helpline Workplace Information Service on 03300 555 300.

If you have further questions and would like to contact our advice team please use our advice contact form below or call us.

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The information on the law contained on this site is provided free of charge and does not, and is not intended to, amount to legal advice to any person on a specific case or matter. If you are not a solicitor, you are advised to obtain specific legal advice about your case or matter and not to rely solely on this information. Law and guidance is changing regularly in this area.

We cannot provide advice on employment rights in Northern Ireland as the law is different. You can visit the Labour Relations Agency or call their helpline Workplace Information Service on 03300 555 300.