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  • Overview

    Could you live without a job?

    For some the answer is ‘of course, as long as I win the lottery!’ But for the majority of us, our employment is our livelihood; it pays for the food on our table, the clothes on our backs to the cars we drive.

    It comes as no surprise then that when an employer becomes insolvent (they are no longer able to pay their debts and could eventually stop trading) it is a cause of great concern to employees who will usually find themselves out of a job and are usually owed money.

    The Insolvency Service Redundancy Payments Service (RPS)

    All is not lost though! The RPS can make payments to employees in exactly this situation. However, these payments are subject to various caps and qualifying criteria. You are unlikely to get everything that your employer owed but payments that the RPS can make include:

    • up to 6 weeks holiday pay
    • statutory notice pay
    • redundancy pay
    • up to 8 weeks arrears of unpaid wages, including a payment for a protective award if your employer has failed to consult collectively
    • unpaid pension contributions
    • a basic award for unfair dismissal.
       

    An update to holiday pay payable by RPS

    The amount of holiday pay awarded by the RPS has been increased following the recent case of British Gas Trading Ltd v Lock & another where the Employment Appeal Tribunal (EAT) decided that holiday pay should include contractual-based commission.

    To calculate how much an individual is entitled to, they will need to demonstrate their contractual-based commission earnings for a period of 12 weeks. The RPS will calculate the average amount paid to conclude what should have been included in the holiday pay.

    This follows a spate of case law that demonstrates a clear flow of traffic whereby tribunals are trying to assess and ensure that employees are paid their ‘normal’ pay during their leave. It is therefore refreshing to see that the RPS too are towing this line.

    Who does this affect?

    Well the decision is retrospective and so it applies to everyone who has ever applied for and received holiday pay from the RPS in relation to a previous employer.

    However, with everything there are eligibility criteria which we consider in greater detail below.

    Applications made to the RPS after 31 July 2011

    The RPS have indicated that they will be contacting this category of applications directly, provided that at the time of insolvency:

    • you applied for holiday pay from the RPS
    • indicated that you were entitled to receive contractual commission on your application form.
       

    Applications made to the RPS before 1 August 2011

    If you fall into this category then you need to contact the RPS directly. In order to be successful in receiving additional payments for holiday pay calculations, you will need to demonstrate that you:

    • applied and received holiday pay before August 2011 from the RPS
    • indicated that you were entitled to contractual commission in the application form
    • have supporting evidence.
       

    To do this you will need to have:

    • your contract of employment
    • evidence of commission payments 12 weeks prior to the date of insolvency.
       

    Without the evidence, the RPS will not be able to determine what, if any, payments you might be eligible for.

    Not eligible for further payments

    The RPS has also indicated that there will be a further category of people who are not eligible for increased payments, these include individuals who:

    • did not raise an application/claim at the time;
    • had their application rejected and/or did not receive any money from RPS; and
    • did not receive a payment for holiday pay.
       

    Closing thoughts

    If you lost your job because of the insolvency of a previous employer, it would be worth gathering as much information as you can, including:

    • a reference number from the insolvency practitioner
    • your letter of redundancy or otherwise termination
    • employment details including how much you were paid and details of a commission
    • holiday entitlement
    • correspondence at the time of the insolvency
    • your application form to the RPS.
  • Related Services

    Employment Advice for Employees

    Our employment solicitors give straightforward legal advice, find proactive solutions and achieve quick results

    Redundancy and termination

    Our employment lawyers can advise you whether your redundancy or termination is fair, and ensure any settlement you receive properly compensates you.  

Get In Touch

By submitting an enquiry through 'get in touch' your data will only be used to contact you regarding your enquiry. If you would like to receive newsletters from Thomson Snell & Passmore please use the separate form below.

Newsletter Sign Up

General Private Client UpdatesGeneral Commercial UpdatesConstruction UpdatesCourt of Protection UpdatesAgriculture & Rural Affairs UpdatesCommercial Property UpdatesEmployment UpdatesDispute Resolution UpdatesCorporate & Commercial UpdatesCharities & Not for Profit UpdatesFood & Drink UpdatesEducation UpdatesTransport & Logistics UpdatesFamily Business & Owner Managed Businesses Updates

I agree to be ‘opted in’ to receive Thomson Snell & Passmore newsletters, event invitations and other publications that are related to the subject matter of this event or my industry sector. I understand that this means they will send me these communications by email

I agree

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Jargon Buster