Redundancy claims when your employer ceases trading without a formal liquidation process

I knew the company I was working for was in trouble and that it would be a matter of when, not if, it went out of business, but I’d also been there since the beginning and assumed that meant I was entitled to enough statutory redundancy to tide me over until I could get a business started or find a new position elsewhere. When things became increasingly unpleasant towards the end it’s one of the main reasons, frankly, that I chose to stay.

Until very recently I didn’t even realise that it was possible for there to be a scenario where employees were not able to go to the National Insurance fund to claim their statutory redundancy entitlement if a company stopped trading due to insolvency.

That’s because whenever I searched for information it always took me to the Gov.uk site outlining the standard process, starting with having a ‘CN’ number issued by an insolvency practitioner which would normally enable you to complete the forms linked there to claim any redundancy, unpaid wages and holiday pay, along with an ‘LN’ number for the loss of notice period.

I’m writing this article because this information wasn’t easy to find elsewhere. In particular the word ‘insolvency’ can be a red herring when you search online – and consult with professionals – because it always leads you back to that standard claim process which starts with being issued a CN number. 

In my case I was informed my employer was insolvent and had ceased trading, with a company taking over to ‘administer’ that process, seemingly with a view to having it struck off quietly, rather than entering a formal insolvency process – hence no insolvency practitioner, no CN number and no statutory redundancy for employees.

Without that number it seems like you are left in limbo and unable to claim the statutory redundancy that you should be entitled to.

The problem, in this case, is that the company you worked for still legally exists as an entity and it is, therefore, that company that should be responsible for paying any money that you’re entitled to, even though – catch 22 – it has no money and you are likely being told that will not happen.

The company might be financially insolvent and no longer trading, but this is not the same as it going into a formal liquidation/insolvency process and that’s the key difference.

This, in turn, means that you, as an employee, can’t make a claim from the National Insurance fund and, seemingly, leaves you with few options if the company is refusing to pay what you are owed.

You do have the option to petition the High Court yourself – or together, as a coalition of employees/creditors – for the company to be wound up and thereby be forced into a formal liquidation. However this costs money, and, for me, as I was working in such a small company, did not seem like a financially viable option, though I’d say this is well worth looking into if there are enough of you to join forces and split the costs and you stand to gain more than it will cost.

So the advice I was eventually able to piece together seemingly left me with only one option, which would be to take the former employer to an employment tribunal for the unpaid redundancy.

If you win the tribunal you will be given a ‘TN’ number which will then enable you to go to the National Insurance fund and claim for the redundancy that you are entitled to.

The bad news is, I’m told, that it’s unlikely that you will receive any outstanding payments for your notice period or for any holiday pay you would have normally been entitled to, and the process will take a number of months.

The first step is to contact ACAS who were very helpful in guiding me through the process I outline here:

  1. Write a letter – first write a letter making a request to your employer for the monies that you are entitled to and wait for a response.
  2. Early Conciliation – if your former employer pays you, happy days! However, assuming the response is negative, or the letter is ignored, ACAS will then give you a link to complete an ‘Early Conciliation notification form’ online. When this is completed you will receive a claim reference number and you will need to call ACAS to discuss conciliation.
  3. Go to ACAS for Early Conciliation – in my case the letters and phone conversations I had received from the company now representing my employer were very blunt in informing me that none of my entitlements would be forthcoming, so ACAS’ advisor felt that attempting conciliation was not necessary and issued me with an ‘Early Conciliation Certificate’ with a reference number.
  4. Fill in the ET1 form to begin the employment tribunal – this reference number enables you to start the process of an employment tribunal by completing an ET1 form.
  5. Wait for a hearing date – a copy of this information will be sent to the employer, who will be given 28 days to respond, after which a date will be set for the tribunal. This could be many months in the future. 

This is the stage I am currently at and will update this article as and when things progress.

All this is well outside my normal area of expertise – design – but I hope this article is at least helpful in guiding you in the right direction. I would recommend making ACAS, who are experts, your first port of call. I’ve included links below: