Statutory Redundancy

When a company enters formal insolvency and employees are made redundant they are entitled to received payments from the redundancy payments service rather than sitting in the pot with the rest of the creditors. The redundancy payments service is backed by the national insurance fund, which then takes the employee’s place as a creditor of the company.

What does the increase mean for employees?

From 6 April 2018 the statutory cap on the level of redundancy payments will increase from £489 to £508 per week to take into account wage growth and inflation. This applies to claims for unpaid wages, holiday pay, redundancy pay and compensatory notice pay.

The increase will only affect employees who are paid in excess of £508 per week, meaning those who are on a salary exceeding £26,500. The below illustration gives an example of how the changes could affect a 40 year old employee who has been employed for 10 years earning £600 per week. The Illustration assumes a month of unpaid wages and 2 weeks outstanding holiday and is before deductions for tax and notice mitigation.


Previous Limit     

New Limit     




Compensatory Notice Pay                    



Unpaid Wages



Holiday Pay






As can been seen an employee in these circumstances would now be around £500 better off, before tax, under the new limits. For more information about the redundancy process on the liquidation of your company please contact us.