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PAYING OFF THE WORKERS
Page 27
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Where employees are dismissed because of the company's insolvency, they gain preferential status for certain debts owed to the employees, and they are guaranteed payments out of the National Insurance Fund.
Preferential status is granted on 'remuneration' owing to employees for the four months prior to the insolvency up to a maximum of £800, plus accrued holiday pay. Pension contributions are also preferential debts.
Remuneration is defined in the Insolvency Act 1986 as including wages or salary, remuneration for a period of absence of work through sickness or other good cause, guarantee payments, medical suspension payments and payments for time off.
Other monies owing do not have preferential status.
Only certain types of payments to employees of the insolvent firm are paid out of the National Insurance Fund where employees are dismissed or where their employment transfers to a new employer.
These are statutory redundancy payments; statutory maternity pay; remuneration during the eight weeks prior to commencement of insolvency (up to £800); statutory notice pay; holiday pay; and the basic award element of an unfair dismissal award. These payments are based on a statutory maximum week's pay of £350 (2009/10 rate).