Item

Paid by DTI

Paid by Purchaser of business

(i.e. not made redundant)

Paid by the entity through a dividend

(i.e. made redundant)

Paid during Administration by the entity acting through the Insolvency Practitioner

(i.e. trading under the control of the practitioner)

Other notes

Wages and salaries

Up to £400 per week less tax and national insurance following redundancy or transfer.

Any balance above the amount paid by the DTI if the person is transferred to the purchaser.

Any balance above the amount paid by the DTI will be eligible for a dividend should there be one.

Part may have priority status but this does not necessarily mean that it will be paid.

Ongoing wages and salary (qualifying liabilities) are paid by the entity following adoption of the employees’ contracts (from the date the practitioner undertakes to pay the ongoing wages or 14 days following appointment whichever is sooner).

Payment is not guaranteed but is payable before the practitioner receives any fees.

The point between appointment and adoption of the employee’s contract/undertaking by the practitioner is a grey area and may not be payable by any party.

It is best practice to pay employees for the work they do following appointment.

Holiday pay

Holiday accrued in the 12 months prior to the insolvency paid by the DTI subject to the £400 per week limit.

Accrued holiday pay transfers over to the purchaser.

If made redundant anything above the amount paid by the DTI will be classed as preferential and should there be funds available (after payment of costs and certain banks) some, all or none may be paid by the insolvency practitioner.

Holiday earned after following adoption of the employees’ contracts (or undertaking to pay) – see above will be paid by the entity acting through the insolvency practitioner.  See above comments.

As wages and salaries above

Sick pay

Statutory Sick pay is dealt with by the Department of Work and Pensions.  The local benefit centre should be contacted regarding payment of amounts of SSP outstanding

Unclear as to how this works.  Probably treated as per wages and salaries above.

Any amount contractually owed but not paid by the DTI or HMRC (HM Revenue and Customs or Inland Revenue) would be eligible for a dividend.

Following adoption of the contracts or an undertaking to pay, absence through sickness is usually payable in accordance with the normal procedures.

Liability after the date of appointment is the responsibility of HMRC. 

A form can be obtained from benefit centres.

Maternity/Paternity

/Adoption pay

As for Sick pay.

Unclear as to how this works.  Probably treated as per wages and salaries above.

Any amount owed at the date of appointment not paid by the DTI or HMRC.

As for sick pay.

Liability after the date of appointment is the responsibility of HMRC. 

A form can be obtained from benefit centres.

Pension contributions

Employer contributions lowest of

- 12 months contributions,

- 10% of 12 months pay and

- Amount certified to meet liability to pay employee's pensions.

12 months employee contributions.

Contributions in respect of remuneration not actually paid is not paid

Pension liabilities do not transfer over to a purchaser. 

If a final salary scheme is in operation the purchaser may be required to provide a contribution based scheme (whereby the employer contributes) to transferred employees.

Certain contractual claims that are not met by the DTI or under the Pension Protection Fund may be eligible for a dividend.

Contributions to an occupational scheme should be paid by the Practitioner.  If the scheme is underfunded then this may not be necessary should it be likely that the Pension Protection Fund assume responsibility.

The pension arrangements are complex and this document does not cover the provisions in any detail.  Consider taking professional advice or speak to the insolvency practitioner concerned.

Redundancy pay

Statutory redundancy pay paid by the DTI (limit of £400 per week)

Not paid – length of service etc. is transferred over to the purchaser.

If the employee is entitled to an enhanced redundancy package then this element would rank for a dividend should there be funds available.  This element is not preferential.

Not payable.

n/a

Expenses

Not paid by the DTI

May be payable by the purchaser.

Any amounts not paid by any other party would be classified as a non-preferential creditor.

Payable as an expense of the process provided they are authorised by the Insolvency Practitioner or their staff.

Unauthorised amounts may not be paid.