Insolvency of Employer (Rights of employees)
Key points § For many years, wages or salaries owed to employees by an insolvent employer have been treated in law as 'preferential debts'. However, that preference is accorded only to the first £800 of any claim in respect of wages earned during the four months preceding the date of the receiving order or of the appointment of the provisional liquidator. Amounts in excess of £800 (or for periods longer than four months), and other monies owed to an employee at the time his employer became insolvent, rank as ordinary debts (per Insolvency Act 1986, Schedule 6). § In recognition of the fact that it could take years for employees to recover unpaid wages or salaries, let alone any other monies owed by an insolvent employer, sections 182 to 190 of the Employment Rights Act 1996 empower the Secretary of State for Trade & Industry to borrow from the National Insurance Fund and to pay some or all of those monies on the employer's behalf. The Secretary of State would the...