Redundancy in Administration: Your Rights to Pay and Notice

When a business in England and Wales enters formal insolvency procedures such as administration or liquidation, redundancy becomes a common and complex issue for affected employees. Unlike ordinary redundancies, insolvency affects how and from whom you can claim statutory redundancy pay, notice pay, unpaid wages, holiday pay and other entitlements. This article explains the legal framework, practical steps for employees, time limits, and rights to pursue compensation including through tribunals if necessary. All information is drawn from current UK government and authoritative sources.

Insolvency and Redundancy

Insolvency occurs when an employer cannot pay its debts and formal processes are triggered, often involving the appointment of an administrator or liquidator. Redundancy is automatically treated as having occurred if your employment is terminated for reasons related to the insolvency. Termination in this context results from the cessation of work or business without the employer being able to fulfil contractual obligations.

Administration and liquidation are two of the most common forms of insolvency:

• Administration aims to rescue the business or achieve a better result for creditors than immediate liquidation.
• Liquidation (either compulsory or voluntary) generally involves winding up the company and selling assets to repay creditors.

Both processes affect how employee claims are handled and what payments you can obtain.

Employee Rights When Redundancy Happens in Insolvency

If an employer enters administration or liquidation and you are made redundant, you may be entitled to several statutory payments, many of which are administered through the Redundancy Payments Service (RPS) using the National Insurance Fund.

Statutory Redundancy Pay

You can claim statutory redundancy pay if you were an employee and had at least two years' continuous service at the date of redundancy. Entitlement is calculated using your age, length of service and weekly pay, with current statutory caps on weekly pay and total service used for calculation.

Unpaid Wages and Other Money Owed

Insolvency often means employers make redundancies without paying accrued wages, overtime, bonuses or commissions. Employees can claim up to a limited number of weeks' pay for such amounts - typically up to eight weeks, subject to statutory caps.

Holiday Pay

You can claim for holiday accrued but not taken, and holiday taken but not paid for in the 12 months before the insolvency. The total entitlement for holiday pay claims is capped (usually up to six weeks).

Statutory Notice Pay

If you did not work a notice period, or were not paid for it, you can claim statutory notice pay - usually one week's pay for each year of service up to a maximum period, subject to caps.

Administration: What Happens to Employment Contracts

Entering administration does not automatically terminate employment contracts. The administrator initially takes on responsibility for the business, including employee contracts, which remain in force unless and until they are terminated. This means:

• Employees may continue to work while administrators attempt to sell the business or restructure.
• Employment contracts may be terminated as part of insolvency actions, leading to redundancy claims.
• Employees who continue working after the administrator's appointment and later are made redundant remain eligible to claim statutory entitlements if redundancy occurs at a later date.

If the business is sold while in administration, employment may transfer under TUPE (Transfer of Undertakings (Protection of Employment) Regulations). In that situation, your employment rights and continuity are preserved, and you do not normally use the insolvency compensation route for amounts owed prior to the transfer.

Liquidation: Immediate Contract Termination and Claims

In liquidation, particularly compulsory liquidation, employment contracts are usually terminated automatically on the date the company is wound up, unless the liquidator agrees to continue employment. This termination is treated as redundancy for statutory purposes.

If there are insufficient company funds to pay you, you will need to claim statutory entitlements through the RPS using a case reference number (CN) provided by the insolvency practitioner or official receiver. This number is essential to begin the online claim process.

How to Claim Payments

1. Contact the Insolvency Practitioner

Once administration or liquidation is underway, the appointed insolvency practitioner or official receiver will inform you how the insolvency affects your employment. They will provide:

• An RP1 fact sheet explaining redundancy procedures.
• A case reference (CN) number for your claim.

2. Apply Online via the Redundancy Payments Service

Use the CN number to submit an online application to the Redundancy Payments Service (RPS) for:

• Statutory redundancy pay.
• Unpaid wages and contractual money.
• Holiday pay.
• Statutory notice pay.

Applications must normally be made within six months of the redundancy date. If you miss this deadline, you risk losing the right to claim.

3. Provide Accurate Information

The RPS will ask for details such as your employment dates, pay rates, holiday entitlement and amounts owed. If your pay varied, you may be asked to provide averaged figures over relevant reference periods.

Statutory Caps and Limitations

Payments made via the RPS are statutory and subject to caps:

• Weekly pay used in calculations is capped (for redundancies on or after 6 April 2025, the cap is £719 per week).
• Redundancy pay is capped at service up to 20 years.
• Claims for unpaid wages are limited to a set number of weeks, and similar caps apply to holiday pay and notice pay.

If you are owed more than these statutory limits - for example, contractual redundancy terms that exceed the statutory minimum - you may register as a creditor in the insolvency process for the outstanding amount. However, recovery is not guaranteed, as distribution to creditors depends on available assets and priority rules.

Consultation and Tribunal Rights

Employers (or administrators acting in their stead) are expected to undertake fair redundancy procedures, including consultation, even in insolvency. In collective redundancy situations (e.g. 20 or more employees), consultation requirements under the Trade Union and Labour Relations (Consolidation) Act 1992 may apply, although practicality and special circumstances of insolvency often influence how these operate.

If you believe your redundancy was unfair, lacking genuine consultation or mishandled, you may pursue claims to an employment tribunal. Tribunal awards may include basic awards or protective awards for consultation failures. Where possible, elements corresponding to statutory redundancy, notice, holiday and arrears can be paid via the RPS if the employer is insolvent; other tribunal awards may require action against the employer or as part of creditor claims in insolvency.

Practical Considerations

Directors and Redundancy

Directors can be treated as employees if they meet the legal definition of employment and can demonstrate evidence such as PAYE salary and working hours. Directors may be eligible for statutory redundancy pay in insolvency if they meet criteria.

Continued Work Post‑Insolvency

If you continue working after administration begins, you remain eligible for redundancy pay and other entitlements if you are later dismissed for redundancy. However, claims for pay owed between the insolvency date and dismissal may not be payable via the RPS.

Registering as a Creditor

For amounts beyond statutory limits or where the RPS cannot pay (such as contractual redundancy terms), you can register as a creditor in the liquidation or insolvency process. Payment depends on the distribution of assets and creditor hierarchy.

Key Takeaways

Redundancy during administration or liquidation in England and Wales triggers statutory rights to redundancy pay, unpaid wages, holiday pay and notice pay, often administered through the Redundancy Payments Service using the National Insurance Fund. Employees must obtain a CN reference from the insolvency practitioner and apply within statutory deadlines. Payments are subject to statutory caps and service requirements. Where employers continue trading in administration, employment contracts may survive temporarily, whereas in liquidation contracts usually terminate immediately. Fair consultation procedures and tribunal rights remain relevant and protect employees' broader entitlements beyond statutory minima.