When an insolvent employer cannot pay, employees can claim statutory redundancy pay, up to eight weeks of unpaid wages, up to six weeks of holiday pay and statutory notice pay from the government’s National Insurance Fund through the Redundancy Payments Service. Each week is capped at £751 for redundancies on or after 6 April 2026, and the redundancy claim must normally be made within six months of dismissal using the case reference number supplied by the insolvency practitioner.

When can employees claim from the National Insurance Fund?

Two parts of the Employment Rights Act 1996 provide the safety net. Section 166 lets an employee apply to the Secretary of State for a redundancy payment where the employer is insolvent and the payment is unpaid, and section 167 directs payment out of the National Insurance Fund. Section 182 does the same for other debts, such as arrears of pay and holiday pay, once the employer is insolvent and the employment has ended.

For a company, section 183(3) treats the employer as insolvent if a winding up order has been made or a resolution for voluntary winding up passed, if the company is in administration, if a receiver or manager has been appointed by floating charge holders, or if a company voluntary arrangement has been approved. For an individual employer in England and Wales the triggers include bankruptcy and an arrangement with creditors. A business simply stopping paying, without a formal procedure, does not qualify under these sections, although section 166(1)(a) separately allows a redundancy pay claim where the employee has taken all reasonable steps short of legal proceedings and the employer has still not paid.

GOV.UK says applicants must have been employees, so contractors should register as creditors instead, and must be UK or EEA nationals or foreign nationals with permission to work in the UK.

What can an employee claim, and what are the limits?

Payment Limit Source
Statutory redundancy pay Two years’ continuous employment needed; age band formula; maximum 20 years counted; week’s pay capped at £751 ERA 1996 ss166 to 167, s227
Arrears of pay, including overtime, commission and bonuses due under the contract Up to eight weeks, each capped at £751 s184(1)(a), s186
Holiday pay (taken but unpaid, or accrued) Up to six weeks, earned in the 12 months before the insolvency, each capped at £751 s184(1)(c), s186
Statutory notice pay One week per year of service up to 12 weeks, capped at £751 a week, less benefits received or that could have been claimed s184(1)(b), s86
Basic award for unfair dismissal As awarded by a tribunal s184(1)(d)

The weekly limit in sections 186 and 227 is £751. GOV.UK confirms the lower figure of £719 applies where the employee was made redundant before 6 April 2026. Section 184(2) treats some other amounts as arrears of pay, including guarantee payments, medical or maternity suspension pay and a protective award for failure to consult under section 189 of the Trade Union and Labour Relations (Consolidation) Act 1992, so these count towards the eight week maximum.

Unpaid pension contributions are handled separately. GOV.UK tells employees to contact the insolvency practitioner or official receiver about missing contributions.

How do the caps work in a real claim?

Illustration only. Sam, aged 45, earned £900 a week and had worked for the company for ten full years, all at age 35 or over. The company enters administration on 1 June 2026 and Sam is dismissed the same day without notice. Sam is owed four weeks’ wages and two weeks’ accrued holiday.

  • Redundancy pay: the age bands give one week’s pay for each year aged 22 to 40 and one and a half weeks for each year aged 41 or over. Six of the years fall in the lower band and four in the higher, so 6 plus 6 gives 12 weeks. At the £751 cap that is £9,012, not £10,800.
  • Arrears of pay: four weeks at £751 = £3,004.
  • Holiday pay: two weeks at £751 = £1,502.
  • Statutory notice pay: ten weeks at up to £751, reduced by benefits Sam received or could have claimed during that period.

The redundancy payment calculation is explained step by step in our page on statutory redundancy pay, which also covers the £30,000 tax threshold.

How do you apply?

  1. Get the case reference number. The insolvency practitioner or official receiver must tell employees how their jobs are affected and give them an RP1 fact sheet and a “CN” case reference number. GOV.UK says you cannot claim without it.
  2. Claim redundancy pay, wages and holiday online. Apply as soon as you have been made redundant and within six months of dismissal. The form asks whether you want to claim statutory notice pay, but ticking yes is not an application.
  3. Claim statutory notice pay separately. An “LN” reference is sent after the notice period would have ended, usually no more than 12 weeks after dismissal. You must have applied for redundancy first, even if you are not owed redundancy pay.

Section 164 sets the general six month time limit for redundancy claims, with a further six months only where an employment tribunal considers it just and equitable. In practice, claim as soon as you have the CN number.

What happens after you apply?

GOV.UK says payment usually takes up to six weeks but can take longer. The claim is checked against the employer’s records, such as holiday accrued, and you are only paid if the records show money is owed. If a claim is rejected or underpaid, section 188 lets you complain to an employment tribunal within six months beginning with the date the decision was communicated. The respondents are the Secretary of State for Business and Trade and the former employer.

Once paid, the employee’s rights pass to the government. Sections 167(3) and 189 transfer the employee’s claim against the employer to the Secretary of State, including any preferential status it had in the insolvency, and recoveries are paid back into the National Insurance Fund.

What about money owed above the caps?

Anything above the statutory limits, such as contractual redundancy pay or wages above £751 a week, remains a debt owed by the employer. The employee claims it from the insolvency practitioner as a creditor. Under Schedule 6 to the Insolvency Act 1986, remuneration for the four months before the relevant date, up to an amount set by order, and accrued holiday remuneration are preferential debts, paid before ordinary unsecured creditors. The rest ranks as an unsecured claim and may receive little.

What if you keep working after the insolvency or the business is sold?

  • Kept on by the administrator. You can still claim redundancy pay if dismissed later, but GOV.UK says you cannot claim from the government for wages, holiday pay, bonuses or commission owed between the date of insolvency and the date of dismissal.
  • Transferred to a buyer before the insolvency. No claim can be made against the government.
  • Transferred after the insolvency. You can apply for redundancy pay, statutory notice pay and outstanding wages and holiday.
  • More than one insolvency. Outstanding payments between the first insolvency and dismissal cannot be claimed, even if you did not know about the earlier insolvency.

How are the payments taxed?

GOV.UK states that income tax and National Insurance are deducted from payments for unpaid wages and holiday pay, and that a refund may be due if too much has been taken. Statutory redundancy pay follows the normal rules for termination payments. Notice pay can interact with the rules on post employment notice pay.

What mistakes do people make?

  • Waiting for the insolvency to finish before claiming, and missing the six month limit.
  • Not claiming benefits after dismissal. Benefits you could have claimed are deducted from statutory notice pay whether or not you claimed them.
  • Assuming every worker can claim. Only employees qualify, which is why employment status can decide the outcome.
  • Forgetting the balance above the cap, which must be claimed from the administrator or liquidator.

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Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.