When an employer becomes insolvent, employees who lose their jobs as a result are legally entitled to claim redundancy pay along with any debts owed to them such as unpaid wages, notice pay and holiday pay. The National Insurance Fund (NIF) guarantees a basic minimum payment of specific debts owed by employers to their employees whose employment has been terminated. This includes up to eight weeks’ arrears of pay and up to six weeks’ holiday pay. The Insolvency Service Redundancy Payments Service (RPS) applies its specific relevant criteria to assess the eligibility of the employee’s claim from the NIF.
What has changed?
On 14 September 2017, the Insolvency Service reported that the Employment Appeal Tribunal (EAT) has made various decisions relating to payments for overtime and contractual commission, which in turn has changed the way that holiday pay payments are calculated, and that these apply in respect of payments that may be due by the NIF on the insolvency of an employer.
The EAT has stated that holiday pay should take into account the following:
- Contractual commission – if the individuals were entitled to commission as part of their employment contract.
- Voluntary overtime – if the individuals regularly worked voluntary overtime in the 12 weeks before their employer became insolvent.
What if an employee has already received holiday pay from the RPS?
They may still be eligible to claim an additional payment relating to any commission they were owed by their past employer, as well as any voluntary overtime they worked in the 12 weeks before their employer became insolvent. This does not affect any other payments that have been paid to them – eg their statutory redundancy payment.
Employees that think they could qualify for any additional payments need to contact the Insolvency Service:
- Voluntary overtime
The application deadline for this is 13 October 2017.
The RPS will not be able to assess eligibility without supporting evidence being provided that an employee did carry out regular overtime in the 12 weeks before their employer became insolvent – eg wage slips. Their evidence will be reviewed by the RPS, which will then inform them if they are due an additional payment.
The employee will not be eligible for additional overtime payment if they did not receive a payment for holiday pay from the RPS or if they did not work regular overtime in the 12 weeks before their employer’s insolvency.
- Contractual commission
If an employee has already applied to the RPS for holiday pay after 31 July 2011, the RPS will contact them about how to apply for an additional payment if they have indicated that they may be entitled to contractual commission.
If they applied to the RPS for holiday pay before 1 August 2011, they will need to have contacted the Insolvency Service by 21 September 2017 to apply for this payment. Again, supporting evidence will be required to assess the application, in particular a copy of their contract of employment showing their contractual entitlement to commission. Again, once the evidence has been reviewed they will be contacted about any payments due to them.
They will not be eligible for an additional payment for commission if their application was rejected and they did not receive any money from the Insolvency Service, or if they did not receive a payment for holiday pay from the Insolvency Service.
Clare Gilroy-Scott is a partner, and Becky Minear a trainee solicitor, in the employment team at Goodman Derrick