How much redundancy pay can I claim from the government if my employer won't pay?

The situation

I am currently living in England and I am facing a very difficult situation with my former workplace. I worked for a local manufacturing firm for over eight years, but last month, on 14th October, the company suddenly announced they were closing the site and making everyone redundant. My contract stated I was entitled to a redundancy payment of £4,500 based on my length of service. However, the company has gone into immediate administration and the directors have basically disappeared, leaving us with no way to collect our final pay cheques or our redundancy money. I have already tried contacting the insolvency practitioner and sent several emails to the office, but they just keep saying there are no funds available to pay staff. I have heard that if an employer cannot pay, the government might step in to cover the costs. I am really struggling with my mortgage and bills right now. I need to know exactly how much money I can expect to receive from the state in this specific scenario. Since my employer was supposed to pay me £4,500 but has failed to do so, will the government pay me that full amount, or is there a limit to what they will cover when an employer goes bust?

Detailed Analysis

Because your former employer has gone into administration and cannot pay your redundancy, you may be able to apply for a payment from the Secretary of State. This is a process where the government steps in to cover certain employment debts when a company fails.

Under the law, if you are entitled to a redundancy payment, the government's responsibility is defined by the amount you were supposed to receive. Specifically, the law states that "the sum payable to an employee... where the employer’s payment... is a redundancy payment... is a sum equal to the amount of the redundancy payment or part"^[1]. This means that because your contract entitles you to £4,500, the government is required to pay you an amount equal to that redundancy payment^[1].

To receive this, the Secretary of State must be satisfied that "the employee is entitled to the employer’s payment"^[2]. In your case, since your contract explicitly states you are entitled to £4,500 based on your eight years of service, you meet this requirement. The payment is made "out of the National Insurance Fund"^[2]. This fund is a pool of money used by the state to cover certain employment-related costs when employers default.

Once the government pays you, your legal rights regarding that money change. The law says that "all rights and remedies of the employee with respect to the employer’s payment... are transferred to and vest in the Secretary of State"^[2]. This means that once you receive the £4,500 from the state, you can no longer sue your former employer for that specific money; instead, the government takes over the right to try and recover that money from the company's remaining assets.

Note that state, provincial or local law may add further rules, and you should check specific UK government guidance on insolvency payments.

Statutory Citations

Related Questions

• Is there a limit on how much my redundancy pay can be?
• What happens if my company goes bust and won't pay my redundancy?
• Can I refuse a new job offer from my employer and still get my redundancy pay?
• Can I get both my redundancy pay and my compensation for losing my job at the same time?
• What can I do if my redundancy pay application was rejected or too low?