What are redundancy payments?
Redundancy payments are forms of compensation that are given out when your job suddenly ceases to exist. You could be eligible to claim redundancy if you are an employee or even a business director.
If you seek to claim statutory redundancy pay, payments are fixed by the law. However, if you are entitled to contractual statutory pay, this amount will vary per company. Details of this amount will be located in your employment contract. All employees should hold a contract of employment according to law.
What restrictions do the Insolvency Service have with redundancy payments?
If you were made redundant on or after 6 April 2022, your weekly pay is capped at £571. If you were made redundant before 6 April 2022, these amounts will be lower. This means if your gross weekly pay was more than this we have capped each one of your payments.
If you are owed more than the maximum that the Insolvency Service can pay, you can register as a creditor in the insolvency for any outstanding money you’re owed.
National Insurance is deducted from any payments that the Insolvency Service set aside for holiday pay, arrears of pay, notice worked but not paid, loss of notice compensation and protective awards.
If the payment is made to you on or after 6 April 2022, the deduction will be at a rate of 13.25%, unless the Lower Earning Limit applies to you. If the payment for your award was made before 6 April 2022, NI will be deducted at a rate of 12%.
How do the Insolvency Service determine weekly pay?
Payments are calculated based on your weekly pay. If you are not paid weekly, payments will still be calculated based on what you would be paid for a working week.
Any overtime, commission or bonus pay you earn may be taken into consideration. This depends on what is in your contract of employment.
If you are paid hourly, your weekly pay will be based on your hourly rate multiplied by the number of hours you worked per week.
For redundancy pay, arrears of pay and notice pay, if your number of hours worked per week varied, an average will be taken across 12 weeks. For holiday pay, if your number of hours worked per week varied, an average will be taken over 52 weeks.
Contact the insolvency practitioner dealing with your redundancy if you have any discrepancies with your findings.
How does the Insolvency Service make payments to you?
The Insolvency Service will ask for your bank details when you apply for insolvency. You cannot be paid without these details.
Can you receive pension support?
The Insolvency Service may be able to pay some of your pension shortfall if your employer is insolvent and did not make all of their pension contributions.
Do you pay tax on redundancy payments?
No, you won’t pay any tax on your redundancy payments.
If you have any more questions please see our main page on Director redundancy.
And if you need any assistance closing your company and applying for redundancy payments then contact us on 0800 088 2142 on email firstname.lastname@example.org
Our trained experts have over 60 years experience and have helped thousands of clients just like you.