Who pays redundancy when a business closes?
Redundancy is never easy but it’s important that you know your rights in terms of redundancy pay when you are made redundant today in this article we will cover everything you need to know about what happens and who pays your redundancy when a business closes.
How do people become redundant?
If you are not sure what redundancy is it’s where your employer cannot pay its debts and is considered insolvent there are many ways employers can keep employees though even when a business becomes insolvent and there are many different routes a business owner can take depending on which business you previously had a career in below we will list all the possible routes a business owner can take when they are insolvent:
- When your employer is insolvent they might make you redundant
- Your employer may ask you to keep working for them until the company gets back on its feet
- You may be transferred to another employer many business owners seem to take this path to be fair to their employees
Now you know what redundancy is, you may be wondering what are the different types of insolvency. We will list all the different types of insolvency.
Administration – Administration is an insolvency process by which a company is placed under the control of an insolvency practitioner to enable the insolvency practitioner to achieve objectives laid down by statute.
Liquidation – Insolvent liquidation means that a company is closing because it cannot pay its bills as they fall due (cash flow insolvency), or the value of business assets is less than its liabilities (balance sheet insolvency).
Bankruptcy – The process taken when a business or an individual are not able to pay their creditors when debts are due or meet their financial obligations.
Receivership – Receivership is a process in which a creditor appoints a receiver over one or more of the insolvent companys’ assets or properties specified in a legal charge within a secured loan agreement.
Company Voluntary Arrangement – A company voluntary arrangement otherwise known as a (CVA) is a procedure that allows a company: To settle debts by paying only a proportion of the amount that it owes to creditors. To come to some other arrangement with its creditors over the payment of its debts.
An Individual Voluntary Arrangement – An individual voluntary arrangement otherwise known as an IVA is an agreement with your creditors to pay all or part of your debts. You agree to make regular payments to an insolvency practitioner, who will divide this money between your creditors. An IVA can give you more control of your assets than bankruptcy.
Debt relief order – Debts that can go into a debt relief order otherwise known as a DRO are called ‘qualifying debts’. During the debt relief order period creditors can’t ask you for payments – if they do, you don’t have to pay them. They include: credit cards, overdrafts and loans. arrears with rent, utility bills, telephone bills, council tax and income tax.
What money are you entitled to after being made redundant?
According to the gov.uk website there are many different factors that depend on how much money you can get after being made redundant these factors include:
- How long you were employed
- What was in your employment contract
- Your age
You are normally entitled to redundancy pay if you have been made redundant and have been an employee in that particular company for 2 years or more. We will now list the type of money you can expect to receive when you claim your redundancy payment according to this article:
- Half a week’s pay for each full year you were employed and under 22 years old
- One week’s pay for each full year you were employed and between 22 and 40 years old
- One and half week’s pay for each full year you were employed and 41 or older
- Redundancy payments are capped at £571 a week (£544 if you were made redundant before 6 April 2022).
- You can get a payment for a maximum of 20 years that you were employed at the business
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