Insolvency

If the employer is insolvent, the Secretary of State for the Department for Business, Innovation and Skills (BIS) assumes responsibility via the National Insurance Fund, but only for part of the tribunal award.

The National Insurance Fund will cover:

• the basic award;

• statutory notice pay;

• arrears of pay to a maximum of eight weeks; and

• holiday pay to a maximum of six weeks.

A “week’s pay” is capped at a maximum of £475 (2015-16).

Contractual lay-off pay will not be 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 employees later transfer to a new employer, they will have lost their right 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. Acas Early Conciliation applies (see Chapter 13). Any sums 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 at: www.gov.uk/your-rights-if-your-employer-is-insolvent (see also Chapters 11 and 12).