# What happens if my company goes bust and won't pay my redundancy?

- Jurisdiction: United Kingdom
- Practice area: Employment Law
- Published: 2026-10-28
- Last updated: 2026-10-28
- Canonical: https://lawasked.com/uk/employment-law/happens-if-my-company-goes-bust-won-t

## Question

I am writing to seek some guidance regarding my situation here in England. I worked for a small manufacturing firm for over four years, but unfortunately, the company went into liquidation last month after failing to pay their creditors. I was officially made redundant on the 15th of October, and I was owed exactly £3,500 in statutory redundancy pay. I have already tried contacting the appointed insolvency practitioner several times to ask when my final pay cheque will be processed, but they have informed me that there simply isn't enough money left in the company's accounts to cover the staff wages or my redundancy. I have my original employment contract and my P45 ready to prove my length of service. Since the business has completely folded and has no assets left to pay me, I am feeling quite stuck. I am unsure if there is any way for the government to step in and pay this money to me directly from a public fund, and if they do pay me, does that mean I lose my right to try and sue the old company directors personally for the money later on?

## Summary

Yes, you can apply to the government to receive your unpaid redundancy pay from a public fund. However, once the government pays you, your legal rights to claim that specific money from the company are transferred to the state.

## Analysis

Because your manufacturing firm is in liquidation, it is considered 'insolvent' [2]. Under the law, when an employer is insolvent and fails to pay a redundancy payment, an employee can apply to the Secretary of State for payment [2]. This money is paid out of the National Insurance Fund [1]. 

To qualify for this, you must meet certain requirements. The Secretary of State must be satisfied that "the employee is entitled to the employer’s payment" [1]. Since you have worked there for over four years, you meet the requirement that your right to the payment arises from a period of continuous employment "which is not less than two years" [1]. 

Regarding your concern about suing the directors, the law states that once the Secretary of State pays you, "all rights and remedies of the employee with respect to the employer’s payment... are transferred to and vest in the Secretary of State" [1]. This means that for the £3,500 you receive from the government, you no longer hold the right to sue for that specific amount; instead, the government takes over the right to pursue the company for it. 

It is important to note that the law provided here specifically addresses the statutory redundancy payment. If you believe you are owed additional money based on a private contract that exceeds statutory limits, the rules regarding the transfer of rights might apply differently to those specific amounts, but the provided text focuses on the statutory entitlement.

## Statutory citations

- Employment Rights Act 1996, Section 167 - Making of payments. [in force] (https://www.legislation.gov.uk/ukpga/1996/18/section/167)
  > Where... the Secretary of State is satisfied that the requirements specified in subsection (2) are met, he shall pay to the employee out of the National Insurance Fund a sum calculated in accordance with section 168
- Employment Rights Act 1996, Section 167 - Making of payments. [in force] (https://www.legislation.gov.uk/ukpga/1996/18/section/167)
  > all rights and remedies of the employee with respect to the employer’s payment... are transferred to and vest in the Secretary of State
- Employment Rights Act 1996, Section 166 - Applications for payments. [in force] (https://www.legislation.gov.uk/ukpga/1996/18/section/166)
  > that the employer is insolvent and the whole or part of the payment remains unpaid, the employee may apply to the Secretary of State for a payment under this section.

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