November 2019

Do I get redundancy pay if the company goes into liquidation?

If your employer goes into liquidation they may not have the funds available to make redundancy payments, however you can claim certain payments from the government’s National Insurance Fund.

The National Insurance Fund is made up of National Insurance contributions which are held to be used to pay for statutory schemes such as state pensions and redundancy.

The claims you are able to make from the National Insurance fund include:

Holiday pay

Salary arrears

Statutory notice pay

Statutory redundancy pay

Pension contribution.

Those payments are however subject to certain limits, which are:

Unpaid wages – up to eight weeks pay

Statutory Notice pay – between one and 12 weeks’ pay (depending on length of service)

Holiday entitlement which has accrued but not been taken in the last 12 months

Statutory redundancy payment (which depends on age and length of service).

All of the above are also subject to a cap on a week’s pay (currently £525 per week as of April 2019), which normally increases in April each year.

It is common for the appointed company liquidators to advise employees on their ability to make a claim to the National Insurance Fund for those payments outlined, but they are often far less well informed about the claims protective awards that an employee may be able to bring.

What is a protective award?

A protective award is an award of compensation where 20 or more employees are made redundant at a single workplace, and the employer fails to properly inform and engage in consultation about those redundancies.

Employers have a duty to consult with employee representatives before the redundancies are made. Where employers have breached this duty, a claim can be brought in by the Employment Tribunal and up to 90 days’ pay (per employee) can be awarded by the Employment Tribunal.

There is no minimum length of service required to bring protective award claims but such claims must be commenced within three months less a day from the date of dismissal. It is important to note that an employee must first complete the ACAS (Advisory, Conciliation and Arbitration Service) early Conciliation process, which will need to be done directly with ACAS by filling out a form online; this has the effect of extending the time limit. The length of the extension will vary, depending on how long the conciliation period lasts and it is therefore important to take legal advice first.

Can you make both a protective award and a National Insurance Fund claim?

A protective award is classified as arrears of pay for the purposes of the National Insurance Fund, which means that, yes, employees can make a protective award and a National Insurance Fund claim. However, an order from the Employment Tribunal making a protective award to an employee would be needed prior to the National Insurance Fund accepting and making any payment to a redundant employee for a protective award element.

It is also important to note that the eight-week limit on arrears of pay will still apply and therefore any other arrears of wages (excluding notice pay, holiday pay or statutory redundancy pay) will come out of the eight-week limit. Even where there are no outstanding wages due, this means that where an Employment Tribunal sees fit to award 90 days’ pay, the National Insurance Fund will only pay out a maximum of 56 days.

Whilst outstanding sums above the cap of eight weeks pay can be claimed from the insolvent employer directly, including any unpaid part of a protective award, it is unlikely in an insolvency situation that the employer or its liquidators would have the funds to pay.

Like it or not, we live in a digital age where technology has changed the way in which we store our data and even our memories. Even if we are not aware of it, most of us will have digital assets of one kind or another. This begs the question as to how such assets are dealt with when we die. Can they be inherited and transferred to the beneficiaries in our Wills? Can our online accounts be accessed by our loved ones? Or are they lost forever?

What are digital assets?

In simple terms a ‘digital asset’ is something intangible but that has a value, be it a financial or sentimental one. Examples include but are not limited to:

Data
Software
E-mails
Designs
Patents
Online accounts
Digital photographs
Web addresses
Digital money known as cryptocurrency

Do we own our digital assets?

It might surprise you to learn that we do not always own what we perceive to be our digital assets. Often, our online accounts, for example, are used under the terms of a licence agreement, which we enter into by accepting the provider’s terms and conditions. Here’s an example: iTunes accounts – we do not own the music that we “purchase”, but rather we just have the right to listen to it under the terms of the licence agreement. A licence is usually non-transferable and will be specific to the individual licensee. This has implications after death, as the person might have wanted to pass on the content of their accounts, but the executors may find that they are unable to.

Generally if held under a licence, the licence agreement will determine what will happen to the account upon death. For example, social media accounts such as Facebook or Instagram can be “memorialised” where friends and family can continue to share memories about us after we pass away. Other providers, such as Twitter, close accounts upon death and provide our families with an archive of all our public posts.

Beyond our social media profiles, accounts such as those with Dropbox are automatically deleted after a period of inactivity. This is also often the case with email providers, although some allow access to authorised people after the account’s closure, where others allow the account to be transferred. It is not difficult to see therefore how confusion, uncertainty and logistical problems can arise. After all, the digital world is a relative newcomer and every day new inventions and systems are adding to the complexity.

To overcome these problems, you may simply opt to share your passwords so as to give access to digital content to someone you choose. However, notwithstanding issues of confidentiality during your lifetime, you should be wary of doing this because this could be in breach of your agreement under the provider’s terms of business.

How do our loved ones find out about our digital assets?

Given that our digital assets by definition have no physical presence, it can be extremely difficult to trace them when we pass away. However, it’s important that our executors are able to find details, particularly where the assets have a financial value, such as our PayPal accounts, intellectual property such as royalties or digital cryptocurrencies (e.g. Bitcoin). In some circumstances these assets can be highly valuable and should be declared by our executors, particularly as an inheritance tax liability may arise and penalties may otherwise become payable.

Our recommendation is at the very least to keep an inventory of all of your digital assets and details as to how they can be accessed, whilst still keeping your passwords private. This might involve the use of an online password manager, for example. We’ve created a useful digital assets inventory for you to use – you can download the PDF here.

Including your digital assets in a Will

You should also consider who you would like to inherit your digital assets where this is possible. You can include a clause in your Will giving your executors discretion to deal with these items, or you can include specific gifts depending on the asset in question. You should also consider your choice of executors as it is often advisable to have separate executors dealing with your digital assets, as opposed to all other assets.

There is clearly some need for legal reform in relation to digital assets and succession. There is no joined-up thinking as to how different types of digital assets are treated on death, as a result of a lack of relevant legislation. In the meantime it is important to be aware of the problems that can arise if you have not planned properly.

Wills and succession solicitors and advice

Tees has specialist succession planning solicitors who can help you:

If you have digital assets and need to write or make amendments to your Will
If you are an executor dealing with an estate involving digital assets
If you have received an inheritance of a digital asset in a Will and need advice on how this can be dealt with
If you are related to someone who has passed away without a Will in place where the deceased had digital assets

When a business goes into liquidation resulting in large scale redundancies, employees will often be unsure on what to do and what payments they may be able to claim.