11. Employment issues
Employment issues
This section contains content published after 1 January 2020. Articles published before this date can be found on the National Archives here
The reference period applied to calculations for holiday pay only has been extended from 12 weeks to 52 weeks. This reference period change applies to all employees with variable pay. The change intends to provide additional protection to employees, particularly those with seasonal variations in pay.
The increased reference period was recommended by the Taylor Review of Modern Working Practices, which the Government progressed through the Good Work Plan. This change ensures holiday pay for employees with variable pay more accurately reflects their actual annual earnings.
Further information on the change is available here.
What this means for insolvency practitioners
Insolvency practitioners should now calculate the rate of pay for holiday pay for all employees with variable pay using the 52-week reference period. Advice on calculations can be found here. This change is effective immediately.
How do insolvency practitioners notify the Redundancy Payments Service RPS) of the rate of pay pertaining to holiday pay
In the short term and in order to ensure there is no disruption to payments being made to claimants, a dedicated email address will be set up for insolvency practitioners to use for the RPS to receive this additional rate of pay data. Please see additional chapter with detailed information on the process for submission along with FAQs.
The RPS is reconfiguring its systems and will work with insolvency practitioners to ensure that the automated interface to the RPS is able to receive this additional rate of pay as soon as possible.
Claimants
The RPS is also updating its systems for claimants to submit their 52-week pay rate. This will include updating the claimant interface with RPS.
Claims since 6 April 2020
The legislation came into force on 6 April, however the RPS has only recently become aware of its applicability to the holiday pay element of a redundancy payment. The guidance on GOV.UK has now been updated to reflect this application. The change is expected to have only a small impact, if any, on the overall amount of monies payable following redundancy. Holiday pay typically represents only 5% on average of the total amount paid, and therefore the change to the calculation basis is not expected to have a material impact on overall amounts paid to individuals. However, there may be some claimants since 6 April where this legislative change has not been applied and on the new basis of calculation are due a small top-up payment. The RPS is taking steps to review these payments and will pay any further amounts that may be due.
Request
Where insolvency practitioners are dealing with large numbers of employees, the RPS inspectors will work closely with them to ensure the information is efficiently shared.
Enquiries regarding this article may be sent to:
This article is to provide details on how insolvency practitioners should submit the secondary rate of pay for holiday pay to the Redundancy Payments Service (RPS).
Background
As of 6 April 2020, the reference period for holiday pay has been extended from 12 weeks to 52 weeks. This change relates to holiday pay only and applies to both holiday pay accrued and holiday taken but not paid, for all employees with variable pay.
The RPS will still need the 12-week average to calculate all other components.
Process for providing second rate of pay
At present the 52-week rate of pay cannot be submitted through IPUS. The RPS is working on IT changes which will allow the second rate of pay to be included in the RP14A and will send a further update when this is available.
In the meantime, the process for getting this information to the RPS is as follows:
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All RP14As should be submitted as usual, including information at the 12-week average rate of pay.
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Once practitioners have submitted the RP14A the RPS will email a separate spreadsheet to complete with the 52-week average rate of pay for the holiday pay calculation.
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Please complete the spreadsheet and return it to the RPS within five working days to RPS.holidaypay@insolvency.gov.uk.
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The RPS will work with insolvency practitioners to improve this process to make it as efficient as possible whilst it is in operation.
There is guidance online about calculating holiday pay for employees without fixed hours or pay.
Information from claimants - RP1
Whilst the RPS updates its IT systems and online claim form, it will only be asking insolvency practitioners to provide the secondary rate of pay. Claimants will continue to fill in their holiday pay information on the RP1 based on 12 weeks.
The fact sheet and payment letter will make clear to the claimant that the RPS have used an alternative rate of pay to calculate their holiday pay, based on information supplied by the insolvency practitioner.
In the short term, this approach will allow the RPS to continue to process holiday pay payments quickly, and avoid claimants having to separately calculate and submit their rate of pay for holiday pay.
Frequently asked questions
1. How do I calculate the 52-week rate of pay?
There is guidance online to help insolvency practitioners calculate the 52 week rate of pay.
2. What about payments made since 6 April?
The RPS will be contacting insolvency practitioners for cases between 6 April and now to request 52-week rates of pay.
Any claimant who has received holiday pay already, which should have been higher, will receive a top up payment.
Overpayments will be offset where there are future claims made to the RPS.
3. What about holiday taken but not paid prior to the 6 April and post?
Any holiday taken but not paid prior to the 6 April will need to be calculated on the 12-week average. If on or after this date, it will need to be calculated on the revised 52-week average.
4. Exactly what information will you need and in what format?
Insolvency practitioners will need to provide the 52-week rate of pay in the spreadsheet. The spreadsheet will be sent to practitioners directly following the receipt of an RP14A with a holiday pay component.
The only information practitioners will need to add to the spreadsheet is the 52-week rate of pay, in column H of the spreadsheet.
Column G of the spreadsheet will tell practitioners the current rate of pay we have for the claimant.
5. What if I don’t have the 52-week information for payments made since 6 April?
Where a claimant has been employed for less than 52 weeks, the reference period is shortened to the number of weeks of their employment.
The reference period must only include weeks for which the claimant was actually paid. It must not include weeks where they were not paid as they did not work. This principle has not changed under new legislation. The legislation also introduces a cap on how far back the reference period may go, which is 104 weeks. Where this gives less than 52 weeks, the reference period is shortened to that lower number of weeks.
6. When will practitioners be able to submit the 52-week rate via the RP14a?
Changes are underway to the IT system which are expected to be implemented in the coming months.
While average underpayments are expected to be small, the RPS has decided to introduce this interim solution and make top-up payments to those already paid in order to ensure that claimants receive their correct amount promptly.
7. Will claimants have to supply the 52-week data as well?
The RPS is not currently asking claimants to supply the 52-week data. Changes will be made to the RP1 application to allow claimants to provide this in future.
Guidance is being developed for claimants to help them understand the calculation for when the RPS start asking them to provide the information.
8. What information will practitioners give to claimants to explain how their Holiday pay was calculated?
The payment letter claimants receive to confirm what payments they will receive has been amended to notify them that the reference period for holiday pay has changed to 52 weeks.
They will be advised to speak to the insolvency practitioner in their case if they do not agree with the rate of pay applied.
9. How will this impact Proof of Debts (PoDs)?
Any affected proof of debts will be amended in due course.
Enquiries regarding this article may be sent to:
This article is being issued to clarify the existing position that was set out previously in Chapter 17 Article 46 and to ensure compliance with the Claims Management Regulator (CMR) set out in Chapter 13 Article 94.
The Redundancy Payments Service (RPS) receives claims from directors where assistance in completing those claim forms has been provided by a CMC. In doing so, a percentage of the amount the director receives from the National Insurance Fund is claimed by the CMC as their fee.
In the vast majority of cases there are no issues concerning directors' claims and they are paid accordingly. The RPS also takes the view that if anyone needs advice on completion of any claim form, they can get such help, without incurring any expense, from the RPS’s gov.uk pages, or from the insolvency practitioner.
Whilst there is no requirement to do so, where an insolvency practitioner is approached by a director for assistance in completing the claim form, the practitioner may refer such person to a CMC.
The office holder is responsible for validating the information provided by claimants in making any claim to the RPS (using forms RP14 and RP14A) with reference to the records of the company. To assist in this duty, an insolvency practitioner may choose to employ a CMC or other agents, or to retain payroll staff. Where an insolvency practitioner has used any agents for assistance in completing their validating information, the insolvency practitioner concerned remains responsible for the accuracy of the information provided. The insolvency practitioner should therefore take steps to ensure there are appropriate safeguards in place to confirm the accuracy and validity of all information provided.
If there is incomplete information or deficiencies in the records of the company, the insolvency practitioner should decide the level of claim that they are willing to validate, using their best judgement. In making this decision, the insolvency practitioner should consider all available means of obtaining relevant information. For example, by examining those records that do exist (including the claims made by the employees), by ensuring the directors comply with their duties to provide information or by employing or retaining specialist payroll or employment rights agents.
An insolvency practitioner should only engage CMCs, who fully comply with requirements of the CMR for assistance in performing their duties whilst also complying with section 2320 of the Code of Ethics.
An insolvency practitioner should also be able to evidence that they are satisfied that any CMC they engage complies with CMR requirements. A CMC should not act as both an agent of the insolvency practitioner and an agent of the claimant in the same case. This would present a conflict of interest within the statutory roles fulfilled by the insolvency practitioner.
The Insolvency Service will continue to report any potential CMR breaches or concerns over completed claim forms to the appropriate Recognised Professional Body for further consideration.
Enquiries regarding this article may be sent to: RPS.Stakeholder@insolvency.gov.uk.
On many large cases, the RPS works closely with the insolvency practitioner and together they create the initial communications for employees.
The RPS is seeking to develop a smoother working process for high profile cases (either employers who are in the public eye, or where there are expected to be 250 or more redundancies) which will benefit both parties – the RPS and the insolvency practitioner.
Large cases process
For large cases, the RPS will work closely with the insolvency practitioner to follow the process below:
- If the employer has not already submitted advanced notification of redundancies, the insolvency practitioner completes the HR1 form and sends it to HR1@insolvency.gov.uk.
- The insolvency practitioner makes initial contact with the RPS (at RPS.stakeholder@insolvency.gov.uk) as early as possible to request a case set up and submits a completed template for setting up a new case.
- The RPS and insolvency practitioner work together to agree employee communications with standard factsheets ready for sending out for furloughed and non-furloughed employees.
- The RPS sets up the case and issues the insolvency practitioner with a case reference number.
- The insolvency practitioner issues a factsheet from the RPS, with an information pack (if applicable), to the employees.
- The RPS inspects the employer's payroll records and may agree to pay off the RP14A.
- If there are any significant changes on the case, such as further rounds of insolvencies, practitioners should contact RPS.stakeholder@insolvency.gov.uk with details.
Following this process will enable the RPS to make payments quickly, and accurately, and ensures that employees receive good quality communications throughout.
To help this procedure run smoothly, this article sets out below:
- The importance of getting in touch with the RPS as early as possible.
- What information the RPS need at the first point of contact.
- What happens after insolvency practitioners contact the RPS.
- What is meant by paying off the RP14A.
Getting in touch early
The RPS does not share commercially sensitive information (other than with other government departments for the purpose of supporting employees).
By getting in touch with the RPS before insolvency practitioners are formally appointed, the RPS can prepare to conduct an inspection and for processing claims.
Where needed, the RPS can also prepare a bespoke factsheet and employee communications in collaboration with practitioners, ready to be given to employees as soon as possible after dismissal. Bespoke factsheets can include information specific to that case in order to help reduce contact and questions from employees.
These ensure the information given to employees is accurate and has been agreed by both the insolvency practitioner and the RPS.
Insolvency practitioners should get in touch us by emailing RPS.stakeholder@insolvency.gov.uk.
Making initial contact: what the RPS needs to know
Separate to insolvency practitioner obligations under Advanced Notification of Redundancies (ANR), the RPS also asks that practitioners send the following information as early on in the appointment process as possible by filling out a template for setting up a new high-profile case.
The template requires information about:
- The industry sector.
- The employer’s name.
- Whether staff are based in England, Wales, Scotland or a combination
- If the HR and payroll staff are being retained.
- When the insolvency practitioner expects to be appointed.
- The total number of employees working for the company.
- The total number of employees being dismissed and how many are currently furloughed.
- Whether the employer is planning to continue trading some or all the business.
- If the employer is planning to sell some or all the business.
- Whether we should expect to be paying all components for all employees, or if some are not applicable or have been paid.
- Any complicated areas e.g. employees with multiple rates of pay, bonuses or commission.
- Contact details for directing employee queries (e.g. any specialist webpages or email addresses that have been set up).
- If there is any media or political interest.
Please send the completed template to RPS.stakeholder@insolvency.gov.uk.
What happens next
Once the RPS receives the case set up template, an RPS inspector will contact the insolvency practitioner to discuss what communications are needed and if a bespoke or standard factsheet is most appropriate.
The RPS can also work with the practitioners to review any communications that have been drafted for employees by themselves or by the insolvent employer.
The RPS will then issue a CN number for each employer and the agreed factsheet(s). It is important that practitioners give the correct CN number and factsheet to each employee, as claims against the wrong case lead to delays and complications.
Going forward, the RPS will not set up cases or issue case reference numbers before this stage in the process. This is in order to limit:
- Employee confusion and claims being put in before the employees understand the situation.
- Claims being withdrawn and amended – creating additional rework and contact for the RPS and insolvency practitioners.
- Employees receiving overpayments.
- Significant delays in employees receiving the correct payments while we wait for payroll information.
- Employees contacting the press, their MPs and the insolvency practitioners with questions and asking to update and amend their claims.
Once redundancies have been made, an RPS inspector will visit the premises and inspect payroll records or may do so remotely. The purpose of the inspection is to see if the RPS can pay off the RP14A rather than adopting RPS's usual stance of using the lower figure of the RP14A or the RP1. Paying off the RP14A enables bulk (quick) processing of payments, using the RP14A information that the insolvency practitioner has established is accurate.
Paying off the RP14A
If RPS agrees to pay off the RP14A this means:
Redundancy pay
- Only paid if claimed by claimant.
- Years of service per RP14A.
- Age per RP14A.
- Rate of pay per RP14A.
- Date of dismissal per RP14A.
- Please confirm separately if any employees resigned, as the RP14A does not enable practitioners to inform the RPS that an employee is not entitled to a redundancy payment.
Arrears of pay
- Only paid if claimed by claimant.
- Rate of pay per RP14A.
- Period of arrears per RP14A.
Holiday pay accrued
- Only paid if claimed by claimant.
- Rate of pay per RP14A.
- Number of days (annual allowance, carry over, taken, leave year start date) – lower of RP1 & RP14A.
Holiday pay taken
- Only paid if claimed by claimant.
- Rate of pay per RP14A.
- Number of days taken – lower of RP1 & RP14A.
Compensation in lieu of notice
- Only paid if claimed by claimant – RP2 required (not just ticking RP1 box).
- Rate of pay per RP14A.
- Years of service per RP14A.
- Date of dismissal per RP14A.
- Date of notice per RP14A.
- Benefits/ notional benefits per RP2.
Once the RPS begin making payments, the inspector and stakeholder relationship manager will keep in touch about any developments on the case and any case decisions that could have an impact on insolvency practitioners.
Enquiries regarding this article may be sent to: RPS.Stakeholder@insolvency.gov.uk.
Given recent media reports highlighting suspected fraudulent activity across a range of government support schemes and services, Insolvency Practitioners are reminded to be vigilant of potential abuses including in relation to redundancy payments claims.
The Redundancy Payments Service (RPS) regularly reviews areas that could be vulnerable to fraudulent claims and Insolvency Practitioners have a role alongside the RPS in helping to prevent fraud occurring. Previous guidance for Insolvency Practitioners on submitting RPS claims can be found at the following link (see parts 21, 27 and 64):
Through accepting appointments and completing the RP14/14A forms, Insolvency Practitioners provide the RPS with details of the employees’ claims which they should have verified against the supporting evidence from the employers’ records which is relied on to make payments.
Insolvency Practitioners are reminded of the need to assess the risks associated with anti-money laundering requirements (AML) and to avoid entering into arrangements which facilitate fraudulent claims. Customer Due Diligence checks, including identification and verification procedures, should be carried out when considering taking an insolvency appointment. To further comply with anti-money laundering (AML) requirements, where an Insolvency Practitioner is aware, or has suspicions, of any criminal activity resulting in an entity being in possession of proceeds of crime, they should submit a Suspicious Activity Report (SAR). Insolvency Practitioners should refer to guidance on SAR reporting procedures issued by their Recognised Professional Body, in addition to guidance provided by the National Crime Agency.
Where an Insolvency Practitioner intends to deal with the assets of, or make any payments from, an entity which they suspect includes proceeds of crime, they should also consider whether they should submit a Defence Against Money Laundering SAR to the National Crime Agency to obtain consent to proceed with the transaction. Insolvency Practitioners should refer to guidance on AML procedures, also issued by their Recognised Professional Body.
When approached to act in a case and it appears sums are due to employees, Insolvency Practitioners should be mindful of any indicators which suggest that the company’s formal insolvency may be being used to perpetrate fraudulent redundancy payment claims. Indicators may include, but are not limited to:
- insolvency proceedings being commenced within 2 years of incorporation, where the company has seemingly not been active for a significant period and/or there is little evidence of recent trading activity or having no or minimal assets;
- Relevant records, bank account activity and RTI information not accurately matching the actual number of employees or periods employed as stated in the RP14A; or
- company creditors being listed as solely or predominantly the directors and/or other employees.
When completing the RP14A, Insolvency Practitioners should be mindful of:
- the potential creation of fictitious employee details (possibly using identities stolen from genuine individuals);
- Cases where the company has been trading for less than two years and claims are for employees that, according to the company’s records or directors, are owed the maximum amounts in respect of arrears of pay or holiday pay;
- inflated rates of pay which are not supported by the wages records;
- employees whose RP14A entry cannot be completed due to incomplete or missing records. Where there is insufficient evidence in the records, IPs should not use the RP1 data to complete the RP14A entry without contacting RPS first to discuss. In the absence of that discussion RPS will assume that there is evidence in the records to substantiate the RP14A; and
- claims from foreign workers who are working illegally.
In submitting information to the RPS, particularly forms RP14/14A, Insolvency Practitioners are providing details required by law, under sections 169 or 190 of the Employment Rights Act 1996.
The wording of the declaration on the RP14/14A requires an Insolvency Practitioner to provide the information correct to the best of their knowledge. In support of this, the Insolvency Practitioner Upload Service is being revised to remind practitioners of their obligations. Any false statement made knowingly or recklessly in providing details of employee claims, or the falsification of any document, may amount to a criminal offence.
Insolvency Practitioners are reminded that they should make an assessment on a case-by-case basis to decide what reasonable checks are necessary to verify information or identities before submitting the RP14/14A to the RPS. Any changes in circumstances or information already provided to the RPS should be included in a new RP14/14A. Any general concerns, or relevant information not included in the RP14/14A, should be reported to the RPS immediately by email to RPS.Stakeholder@insolvency.gov.uk.
Where a case or claim is suspected to be fraudulent, it will be rejected and the RPS will carry out an investigation, including an inspection of the wage records held by the Insolvency Practitioner. The Insolvency Service will take action against any person involved in any fraudulent claims, including any Insolvency Practitioner identified as being complicit in any fraud. In cases where an Insolvency Practitioner is found to have acted negligently or unprofessionally, the matter will be referred to the Practitioner’s authorising body.
General enquiries may be directed to IPregulation.section@insolvency.gov.uk
Background
In Dear IP 107, the Redundancy Payments Service (RPS) wrote to you about a legislative change in the reference period for holiday pay claims.
On 6 April 2020, the reference period for holiday pay changed from 12 weeks to 52 weeks. This reference period change applies to all employees with variable pay. The change is intended to provide additional protection to employees, particularly those with seasonal variations in pay.
Since the Dear IP, RPS has had an interim process in place whilst it updated the software to allow for a second rate of pay for employees.
You are advised that some technical changes will be made to the RP14A and IP Upload Service during the evening of 18 February.
What we’re doing
RPS is adding new elements to the RP14A, to allow you to provide a different rate of pay for holiday pay on the RP14A. You will then be able to upload this through IP Upload Service.
The updated form is now available to download and will need to be used for RP14As submitted from 19 February.
After this date, previous versions of the RP14A will not be accepted. Any RP14As you need to submit on 18 February should be uploaded by 6pm.
The RPS is working with software providers Turnkey and VisionBlue/Aryza so they can integrate a cut over to the new RP14A form.
Changes to the RP14A form
If you use RPS’ RP14A template, there are new fields to complete so that you can provide the additional holiday pay information.
These are:
- 17c. Weekly pay (52-week reference period) – must be populated if the claimant is on a variable rate and claiming holiday pay
- 17d. Reason for not providing 52-week rate – must be populated from the drop down if 17c is left blank
- 18c. Status of 52-week rate of pay for past holiday periods – must be populated from drop down to confirm the status of holiday pay taken but not paid
The RPS has added additional validation into the form to present additional messages if there is an error in the form.
The RPS is also updating the redundancy payment letter to help claimants understand their holiday payment.
Changes if you use IP software (Turnkey and VisionBlue/Aryza) to create RP14As
The RPS has been working with Turnkey and VisionBlue/Aryza and they have updated their systems to allow you to provide the additional holiday pay information through their software.
If you use third party software to upload the RP14A, we recommend you contact your internal IT department and make them aware of a possible new release of the software around 18 February 2021.
What RPS is doing next
Now that the IP Upload Service process has been updated for the new holiday process, the RPS is looking at the claimant side of the process, including amending its online claim form (RP1) to allow claimants to also provide their 52-week average.
The RPS will provide further updates in due course around these changes.
Case set up form change
The RPS recently updated its form for requesting a new case to be set up. From 1 March RPS will no longer accept previous versions of the form.
If you have any questions about the contents of this message, please email RPS.stakeholder@insolvency.gov.uk.
From 12 April, RPS claimants with variable pay will be asked to calculate their 52-week average rate of pay and include it in their claim for redundancy related payments.
When completing the form, claimants will have the option to defer to the information provided in the RP14A if they cannot provide the information themselves.
To help claimants understand the calculation, please share our new holiday pay guidance alongside the RP1 factsheet. Claimants will need to make sure they have worked out their average pay before they start the online form.
So that we can make the necessary changes, the online claim forms (RP1 and RP2) and the IP Upload Service will be unavailable from 5pm on 9 April until 9am on 12 April.
Background
In Dear IP 121, RPS wrote to you to confirm that you can now upload RP14As including the 52-week rate of pay for holiday pay through the IP Upload Service.
Since then, RPS has been updating the claimant facing guidance and online form for applying for redundancy related payments (known as the RP1).
Changes to the RP1 form
From 12 April 2021, claimants will be asked additional questions about their rate of pay for holiday pay if they say they are not on a fixed income.
Claimants will be asked to provide their 52-week average or opt to defer to the information provided by IPs in the RP14A. We have built in this option due to the inherent complexities of the calculation.
Some other sections on the form will also be updated in response to user feedback. This includes, improving the guidance, including where we ask claimants to provide their email address.
Claimants will be able to submit details of how much holiday they have remaining in either hours or days (currently they can only provide the information in days).
If they provide the information in hours, the form will convert this into days for them. Claimants will be able to see both the number of hours they inputted and the number of days this equates to on the summary page for that section of the form.
Online guidance
We’re also publishing guidance on calculating holiday pay rate of pay for claimants on variable pay. This is in addition to the existing BEIS guidance and is specifically targeted towards RPS claimants.
We would be grateful if you would share either copies of, or links, to the guidance alongside our factsheet to help claimants understand their options around providing their 52 week average.
The guidance explains the calculation and that claimants have the option to defer to the RP14A information, as well as some basic worked examples of the calculation.
We are also updating the RP1 factsheet to explain to claimants about calculating average pay, and this also has the web link to the detailed guidance.
Payment letter
We have also made improvements to the content of the payment letter to make it more user friendly. This includes changes around signposting and clear explanations of the different payment components.
If you have any questions about the contents of this message, please email RPS.stakeholder@insolvency.gov.uk.
To ensure businesses have the flexibility they need to respond to the coronavirus pandemic, and to protect workers from losing their statutory holiday entitlement, the Working Time (Coronavirus) (Amendment) Regulations 2020 was introduced. This enables workers to carry holiday forward where the impact of coronavirus means that it has not been reasonably practicable to take it in the leave year to which it relates.https://www.legislation.gov.uk/uksi/2020/365/made
Guidance has been provided to assist employers in identifying when increased holiday carry-over could be appropriate.Holiday entitlement and pay during coronavirus (COVID-19) - GOV.UK (www.gov.uk)
The guidance focuses on businesses that have seen their workloads increase as a result of the pandemic, and that have therefore not been able to allow workers to take their holiday entitlement. The key consideration is whether it was not reasonably practicable for a worker to take annual leave as a result of Covid-19. Various factors should be considered such as:
- whether the business has faced an increase in demand due to Covid-19 that would reasonably require the worker to continue to be at work and cannot be met through alternative practical measures
- the extent to which the business' workforce is disrupted by the Covid-19 and the practical options available to the business to provide temporary cover of essential activities
- the health of the worker and whether they need to take a period of rest and relaxation
The above list is not exhaustive.
Furloughed employees are expected and encouraged to continue to take their holiday. As mentioned in a previous Dear IP, employees taking holiday during the furlough period must have received their normal contractual rate of pay (i.e. 80% from Govt plus 20% from employer).
In determining whether employees who have been furloughed are entitled to carry-over increased holiday, Insolvency Practitioners must be satisfied the employer either prevented or refused leave as a result of Covid-19 measures or for some other direct impact of Covid-19.
Where an employee was furloughed and received an 80% payment for holiday pay, but the employer has not paid the 20% shortfall, the Redundancy Payments Service (RPS) will accept the employee will have a shortfall of 1/5th of their entitlement remaining unpaid. This shortfall can be expressed on the RP14A as an increase in holiday days accrued. Where this has occurred, it is recommended that this is communicated to the claimant(s) so they can adjust their claim.
It is the responsibility of the Insolvency Practitioner to decide whether they feel the circumstances meet the above criteria, as this will not be a decision made by RPS. If the Insolvency Practitioner agrees they meet the criteria, then the uploading of the RP14a will be treated by the RPS as confirmation of their acceptance of the debt.
RPS will pay the lower figure from the RP1 & RP14a. If the claimants have any queries regarding pro-rata holiday calculation based on the information supplied on their RP1 claim, it will be a matter for the Insolvency Practitioner to decide on whether they will need to provide guidance to the claimant.
Any enquiries regarding this article should be directed to: rps.stakeholder@insolvency.gov.uk
The Redundancy Payments Service (RPS) has issued a new template for use by insolvency practitioners and their staff/agents when requesting a new Redundancy Payments case set up.
The questionnaire is designed to assist in early stage case triage by the RPS and to help plan and deliver services to the insolvency profession and to employees who have been made redundant.
The document can be found on our gov.uk page here: Redundancy payments: Template for setting up a new case - GOV.UK (www.gov.uk)
General enquiries may be directed to RPS.Stakeholder@insolvency.gov.uk
The Redundancy Payments Service (RPS) has introduced an automated check on the validity of National Insurance numbers being submitted on RP14A’s via the Insolvency Practitioner Upload Service.
Any National Insurance numbers which are incomplete or missing from the employee record will cause the upload to fail.
Please ensure each employee record contains a correctly formatted National Insurance number. HMRC guidance on National Insurance number formatting can be found here: NIM39110 - National Insurance Manual - HMRC internal manual - GOV.UK (www.gov.uk)
By including National Insurance numbers as part of the set of validating data necessary for successful RP14A uploads, RPS will provide a better service to its customers and minimise inconvenience to insolvency practitioners.
The RPS also has a duty to report the payments it makes in the form of Real Time Information (RTI) to HMRC. The inclusion of valid and correctly formatted National Insurance numbers in the RP14A forms will assist accurate reporting.
General enquiries may be directed to RPS.Stakeholder@insolvency.gov.uk
N.B. This update replaces any previous practices set out in the Dear IP 82 article of November 2018.
Employee status
In the first instance, upon receipt of a director’s claim to the RPS for payments from the National Insurance Fund, the RPS will assess the employment status of that claim in line with Section 230 of the Employment Rights Act 1996 (ERA) and relevant case law.
Where the director is deemed to have been an employee of the company, the claim will be considered for the payment of their statutory entitlements from the RPS.
Where status is deemed to fall short of “employee” status, a formal rejection letter will be provided to the claimant. Should they wish to contest this decision, details of how to apply to an Employment Tribunal will be provided within the rejection letter.
A week’s pay and dividends
Payments made by the RPS are with reference to ‘a week’s pay’. A week’s pay for the purposes of Section 220 of the ERA can only include remuneration that is paid in respect of services provided under a contract of employment. Dividends should be removed from the calculation of a week’s pay when making statutory declarations to the RPS.
Director’s fees
The payment of a director’s fee cannot also be said to be remuneration for employment. A director’s fee is paid solely in respect of the director’s office-holding. Solely being an office-holder does not give rise to employment status.
National Minimum Wage
If the removal of dividends or director’s fee from “a week’s pay” means the remaining rate of pay is below the applicable National Minimum Wage (NMW), the rate of pay used by the RPS will be uplifted to the NMW. This is because employees have the right to be paid at least the NMW for their employment. This includes payments from the RPS.
Director loans
When assessing payment, consideration must be given to any sums owed to the employer by the employee, as under Rules 14.24 and 14.25 of the Insolvency (England and Wales) Rules 2016 and case law, these should be offset. Any payments that are due from the RPS can be offset by any outstanding director’s loans.
Referrals to other government departments
The RPS has a duty to protect public funds and cannot pay out monies where there is doubt as to eligibility for payment. The RPS therefore may require the director to put in writing that they deemed themselves an employee and that they require an uplift to NMW to be paid from the National Insurance Fund.
The RPS may refer claims to HMRC to take action as they see fit. HMRC can issue a notice of arrears for the relevant period of the director’s employment. HMRC can also issue penalties and/or seek redress in the civil court where the maximum fine is £20,000.
Additionally, the RPS can refer cases to the Insolvency Service’s Investigation and Enforcement Services (IES) to assess any possible breaches of fiduciary duty whilst acting as a director of the company, which may result in being named publicly and disqualified from acting as a company director for up to 15 years.
General enquiries regarding this article may be sent to RPS.Stakeholder@insolvency.gov.uk
In the previous year the RPS has received a number of fraudulent claims. Although these claims passed the verification checks undertaken by IPs, they were later found to be based on falsified documents. HMRC, as the body with overall control and management of the National Insurance Fund, is taking forward investigation into the fraud. As a result of this, the RPS has implemented additional controls which have stopped further fraudulent claims being processed and increased checks on new claims being received.
The RPS will now no longer use RP3 forms to gather information from directors. Instead, a new directors’ questionnaire is being issued in its place. Although similar to the RP3, this new questionnaire asks more specific questions to assist the RPS in establishing whether or not the director held employee status. It also includes requests for documents to support the director’s claim, such as contract of employment, HMRC employment history, P60s, wage slips and the latest full company accounts.
In addition to this, where a director has paid themselves at a rate lower than National Minimum Wage, they will be asked to sign a declaration to that effect. This declaration contains an acknowledgement that the RPS may refer the claim to HMRC and the Insolvency Service’s Investigation and Enforcement Services (“IES”) for breach of the National Minimum Wage Act 1998.
Any enquiries regarding this article should be directed towards email: RPS.Stakeholder@insolvency.gov.uk
As detailed in the notification sent on 14 April 2022, The Redundancy Payments Service have introduced an expanded RP14A to be used with effect from 19 April 2022.
The new RP14A Excel template and updated guidance are available here Redundancy payment forms and guidance for insolvency practitioners - GOV.UK (www.gov.uk).
The changes are a reflection on feedback received from the insolvency profession and the increased ability to record employee information on RPS’s claim processing system. The new fields are:
- Column 5a – Is the claimant a company director? (yes/no)
- Column 12 – Is the claimant entitled to redundancy pay? (yes/no)
- Column 13 – Is the claimant entitled to notice pay? (yes/no)
- Column 14 – Does the claimant owe the employer any money? (£0.00’s)
- Column 16 – Average hours worked per week (to one decimal place)
Please ensure that any employees and agents who use this template are informed of the new version and implementation dates as soon as possible.
Any historical versions of the RP14A template saved for use by Insolvency Practitioners should be deleted as it will no longer be supported after Tuesday 19 April 2022.
Developers of commercial IP software products are aware of these changes and will be updating their software accordingly.
For any queries, please contact RPS.stakeholder@insolvency.gov.uk
The Redundancy Payment Service (RPS) is seeking to streamline its working process for pre-appointment notifications, which will benefit all parties – the RPS, Insolvency Practitioners and employees. To do this, RPS will be strictly enforcing the current guidance for case set-up.
Requests for case set-up should not be made more than 7 days before the first dismissal (unless it is a high-profile case), and requests received prior to this, or without an expected insolvency date, will be rejected.
In addition, RPS will close a pre-appointment case if it does not receive any contact or updates from the intended office-holder within 10 working days of setting-up the case.
RPS is making this change to reduce any potential opportunities for fraud, better meet customer expectations and minimize the pressure on IT resources.
Pre-appointment cases that do not enter formal insolvency within a reasonable time (or at all) can impact the timeframes RPS promises to customers, and leaves hundreds of redundant cases.
Going forward, the RPS will not issue case reference numbers before the insolvency date. This is to limit: * employee confusion and claims being put in before employees have had the correct information from the office-holder, * claims being withdrawn and amended – creating additional work and contact for the RPS and Insolvency Practitioners, * employees receiving overpayments, * significant delays in employees receiving the correct payments while we wait for payroll information, * employees contacting the Insolvency Practitioners with questions and asking to update and amend their claims.
If employees attempt to submit claims prior to the insolvency date, they will see an error message stating ‘The case reference number does not match an insolvent company. You can only apply for redundancy payments after a company has become insolvent.’
RPS will monitor this new process to assess its impact on resources.
Enquiries regarding this article may be sent to redundancypaymentsonline@insolvency.gov.uk
N.B. This is an update on a Dear IP 138 article of October 2021 to provide greater clarity to IPs on RPS’s determination of employee status when assessing claims made by company directors.
Director claims to RPS as employees
Only employees who are made redundant are entitled to payments from the National Insurance Fund (NIF).
A director, who is an office holder, can also be an employee and be eligible for payment; however, directors applying to the Insolvency Service for monies owed will need to provide evidence to support their claim that they were an employee.
This updated article is intended to assist Insolvency Practitioners in understanding RPS’s approach to assessing director claims for employee status.
An IP’s approach to establishing a director’s status before completing the RP14a will depend upon the specific circumstances of the case; however, if there are any areas of concern with regard to employee status, please contact RPS at the email address below.
RPS continually examines its processes and as a result of increased claims by ineligible directors, in October 2021, RPS introduced a more robust assessment process.
Directors applying to the Insolvency Service for monies owed will need to provide evidence to support their claim that they were an employee, and this may include the completion of a directors’ questionnaire.
RPS will contact directors after they have submitted their claim to let them know what documents they need to provide. The additional information required will be based on the claimant’s circumstances and may include (this is not an exhaustive list):
- Details as to the structure of the company in terms of directorships and shareholders.
- The last 3 years’ P60s.
- The last 3 months’ wage slips.
- Employer’s bank statements for the last 12 months to review regularity of payments.
- A comparison of the contracted hours being claimed in relation to the work being undertaken.
- Compliance with national minimum wage.
- A copy of the contract of employment and whether the terms of the contract were enacted.
- Dividends received in the last 3 years.
- Holiday pay arrangements.
- Workplace pension arrangements.
- Sick leave procedures.
- Grievance and disciplinary procedures.
RPS will have to consider whether there was a contract of employment in place at the time (which can be express or implied).
From the information provided, RPS will determine, on the balance of probabilities, if they find the director to be an employee.
RPS will reject the claim and not make any payments if they cannot confirm that the director was also an employee of the company. If the claimant disagrees with the decision, they can make a claim to an employment tribunal
Enquiries regarding this article may be sent: RPS.Stakeholder@insolvency.gov.uk
Practitioners are asked to note the coming changes resulting from a small number of Private Member’s Bills having recently received Royal Assent. This will affect the calculation of payments due from the RPS. The effective provisions have not yet been brought into force. A further update will be issued once this happens.
The Employment (Allocation of Tips) Act 2023 aims to ensure employees receive all qualifying tips, gratuities, and service charges, and that these are allocated fairly. Section 11 is not yet in force, but it modifies the definition of wages under section 27 of the Employment Rights Act 1996 to make clear that the term ‘wages’ includes any amount of qualifying tips, gratuities or service charges allocated to the worker. The Act also removes the ability of the worker’s contract, or the worker, to consent to their allocation of tips, gratuities and service charges being withheld; to do so would be an unauthorised deduction of wages.
The Neonatal Care (Leave and Pay) Act 2023 provides a statutory entitlement to paid leave for neonatal care. The Carer’s Leave Act 2023 creates an entitlement for employees to take unpaid leave to care for dependents with long term care needs. The effective provisions when brought into force are likely to modify the calculation of ‘a week’s pay’ to take account of statutory neonatal care leave and carer’s leave.
Enquiries regarding this article may be sent to: