Insolvency

If the employer is insolvent, the secretary of state for the Department for Business and Trade (DBT) assumes responsibility via the National Insurance Fund, but only for part of the award.

The National Insurance Fund will cover:

• the basic award;

• statutory notice pay;

• pay arrears capped at eight weeks; and

• holiday pay capped at six weeks.

A “week’s pay” capped at the maximum of £643 (6 April 2023).

Contractual lay-off pay is not paid by the secretary of state (Benson v Secretary of State [2003] IRLR 748).

A payment by the secretary of state breaks continuity. This means that even if the employee later transfers to a new employer, they will not be able to include previous service for the purposes of any tribunal claim.

If the secretary of state fails to pay, a tribunal claim should be made within three months (less one day). Acas Early Conciliation applies (see Chapter 16).

Any amount owed beyond the sums guaranteed by the secretary of state must be claimed as a debt in the employer’s insolvency.

For more advice, consult the government Insolvency Service.