When Your Employer Goes Bust: Claiming Money You Are Owed

When your employer goes bust, your job usually ends and the money you are owed does not disappear with it. The government's Redundancy Payments Service can pay statutory redundancy pay, unpaid wages and some other debts directly to you, up to set limits. It can pay a maximum of 8 weeks arrears of pay¹.

The scheme is not a rescue of the business and it does not cover everything. It pays employees, not the self-employed, and it caps what it will pay for each type of debt. Anything above the caps, and anything the scheme does not cover at all, becomes an ordinary claim in the insolvency, where you join the queue of creditors and may get only a share of what you are owed.

The practical steps are the same whatever the size of the employer: find out who is handling the insolvency, claim from the government scheme for what it covers, register your claim for the rest, and check your pension contributions were paid in. Free, impartial help is available from Citizens Advice, MoneyHelper and the National Debtline if any of it is unclear².

What happens to your job and pay when your employer goes bust

Insolvency does not always mean the business closes immediately. An insolvency practitioner is usually appointed to take control, and their contact details are often published on the failed company's website⁶. They become the person who deals with the money the business owes, including what it owes you.

Your employment normally ends, and with it your pay. If you are still working while the business is being dealt with, your wages are still owed by the business, and the practitioner is the person to ask about them. If you think an employer has treated you unlawfully, you can make a claim to an employment tribunal⁷.

Debt orders against your wages behave in a particular way when a job ends. If you leave your job, an attachment of earnings order stops, but it is not cancelled by the court, and if you get another job the creditor can use the order again⁸. If you become unemployed, the order lapses⁹. A judgment in default can lead to bailiffs, goods seizure or an earnings order taking money directly from your pay¹⁰.

Some jobs can be affected by going bankrupt or having a debt solution, so it is worth checking your own position before you take on new debt¹¹. If you have a hire purchase agreement, ending it early usually means paying the full amount owed on the original agreement, minus what you have paid, minus what the creditor gets from selling the goods, minus the option to purchase fee¹².

What the government's Redundancy Payments Service can pay you

The Redundancy Payments Service is the government scheme that pays employees what they are owed when an employer cannot. It can pay a maximum of 8 weeks arrears of pay¹. It also pays statutory redundancy pay, and it can pay for other debts set out in the scheme's rules.

There is an important limit on when it will step in. If your employer is solvent, the service can only pay redundancy pay, not the other debts¹. The scheme exists for insolvency, so the practitioner's confirmation that the business cannot pay is what opens the door to the wider payments.

Statutory redundancy pay has its own overall cap. The maximum amount of statutory redundancy pay you can be entitled to overall is £22,530 for 2026-27, up from £21,570³. Your employer should pay your redundancy on the date you leave the company or your next normal pay date³.

Salary sacrifice arrangements do not reduce what you are owed in redundancy pay. Redundancy pay is a lump sum payment from your employer and is not counted as pensionable earnings¹³. If you have redundancy insurance, it typically pays out a proportion of your salary for up to a year, or perhaps two years¹⁴.

Limits on what you can claim

Every part of the government scheme has a ceiling. Arrears of pay are capped at 8 weeks¹, and statutory redundancy pay is capped at £22,530 overall for 2026-27³. Anything above those figures is not paid by the scheme, and becomes a claim in the insolvency instead.

The wider insolvency rules also set thresholds that matter to anyone owed money. A creditor owed £5,000 or more can apply to the court to have an individual declared bankrupt¹⁶. The same £5,000 threshold applies in the monthly insolvency statistics¹⁷. In Scotland, if you are bankrupt you cannot take out credit of more than £2,000 unless you tell the creditor about your status¹⁸.

There are also limits that protect you rather than cap you. Under the payment services rules, a payment service provider can require that you are liable up to a maximum of £35 for losses from the use of a lost, stolen or misappropriated payment instrument¹⁹. That is a cap on your liability, not on what you can claim.

If you owe money from unpaid maintenance payments or benefit overpayments, debt repayments can be taken out of your wages²⁰. That is a separate process from anything your employer's insolvency triggers, and it continues independently of who you work for.

How to claim money you are owed

The route depends on what you are owed and who owes it. For the debts the government scheme covers, the claim goes to the Redundancy Payments Service. For everything else, you register as a creditor in the insolvency.

You must register your claim to money from a bankrupt person or a company so that if there is any money available to pay debts, you can get a share²¹. If the person or company ignores a statutory demand or cannot repay the money, you can apply to a court to make someone bankrupt or get a company wound up (liquidated)²¹.

For redundancy pay specifically, the deadlines are strict. The deadline for claiming redundancy pay you are owed is usually six months minus one day, measured from the last day you were employed³. To claim a redundancy payment where the employer is not insolvent, you must start the process of applying to the tribunal within 6 months minus 1 day from when employment ended². You must also have made a written application to your employer or applied to an industrial tribunal for an award, within six months of your job ending⁴. A written claim to a former employer must be made within six months of your employment ending³.

If you were laid off and are claiming after a lay-off period, the timing is tighter. You must write to your employer within 4 weeks of your last non-working day in the 4 or 6-week period²². If the employer does not reject your claim within 7 days of receiving it, write to the employer again giving them your notice²².

Money the government scheme does not cover

The scheme is not a general compensation fund. It pays the debts set out in its rules, up to its caps, and nothing more. Anything outside that has to be pursued as an ordinary debt.

Self-employed people are the clearest gap. You are self-employed if you are a sole trader or an individual in a business partnership¹⁵, and the insolvency payment scheme is built around employment. Money owed to you as a self-employed contractor is a debt like any other, and you register it with the practitioner.

There is no government backed debt consolidation scheme, so any offer that claims to be one is not what it says²³. A Debt Arrangement Scheme in Scotland cannot protect you from enforcement of child support or maintenance arrears¹⁸. If you are dealing with debt on top of a lost job, the free debt advice charities can set out the options that do exist.

Some protections are narrower than people expect. If you are insolvent, the Financial Ombudsman Service may say the business needs to pay compensation from your complaint to the trustee or practitioner of your insolvency arrangement, rather than to you²⁴. If you have already made a claim about mis-sold motor finance, you must tell your lender about your bankruptcy²⁵. If you took out the finance agreement after your bankruptcy ended, or your bankruptcy was annulled by the courts, you have the right to make the claim and keep the compensation awarded²⁵.

The loan charge settlement scheme has its own rules on which unpaid Inheritance Tax liabilities are no longer payable: those that relate to loan charge arrangements being settled, have already arisen, or arise within 3 months of the date on the settlement offer letter²⁶.

Pensions and where to get help

Your pension is usually the best protected part of this. If your employer goes bust, you will not lose your pension fund²⁷. Money held in your pension usually cannot be claimed by anyone you owe money to, even if you are declared bankrupt or in a formal debt repayment plan²⁸.

Contributions that never made it into the scheme are claimable. You can claim for contributions deducted from your pay but not paid into the scheme during the 12 months before your employer became insolvent⁴. You may also receive unpaid contributions payable by the employer on its own account, for the 12 months before your employer became insolvent⁴. Your employer must make contributions to a workplace pension scheme²⁹.

There is a difference between scheme types. In a trust-based defined contribution scheme, if your employer goes out of business you will get your pension, but your pension pot might be reduced because administration costs are paid by members' pension pots²⁷. If you want to leave a workplace scheme, you can opt out if you ask, and money you have paid is refunded if you opt out within 1 month²⁹.

If contributions are missing, you can report it. The Pensions Regulator asks for the name and address of your employer, your employer's PAYE number if they have one, how much money you think is missing and when, and evidence³⁰. You can complain to MoneyHelper or the Pensions Ombudsman about how your workplace pension is managed²⁷. The Pensions Ombudsman can look at complaints about the administration of personal and occupational pension schemes³¹.

The Pension Protection Fund provides compensation in place of your pension if the scheme is eligible and lacks funds to pay the promised pensions³². It is funded in part by recovery of money from companies that have gone bust³³. Unfunded public service schemes are not eligible³². The Financial Assistance Scheme has also been extended so that a scheme counts as insolvent where the employer became insolvent after the date of scheme wind up and the insolvency had a financial impact because the employer still owed money to the scheme³⁴.

If you are waiting for money, benefits can bridge the gap. If an appeal succeeds, it normally takes between four and six weeks for the Department for Work and Pensions to pay the benefit you missed out on³⁵. For free, impartial help with any part of this, Citizens Advice, MoneyHelper and the National Debtline all advise without charge².