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Employees claimed £250 million in unpaid wages and redundancy pay in past year



The amounts paid out by the government for unpaid wages and redundancy pay has surged to £250 million in the past year as company insolvencies hit their highest level in two decades.

Data obtained by law firm Nockolds from the Insolvency Service found £52.5 million was paid to employees for arrears of pay between September 2022 and 2023, up from £29 million in the same period between 2021 to 2022 and £13.7 million from 2020 to 2021. 

A further £213.8 million was paid out for redundancy pay in the last 12 month period, up from £139.5 million and £168.5 million in the two prior 12-month periods respectively.

Joanna Sutton, principal associate at Nockolds, said: “As business failures have surged this year, we have seen a spike in employers making redundancies to slash costs. 

“In some cases, this is not enough to stave off insolvency, which can prompt widespread job losses, leaving increasing numbers of former employees owed thousands of pounds in unpaid wages and redundancy pay.”

Read more: Government slammed by jobseekers for lack of support

When businesses collapse into insolvency and are unable to meet their obligations to staff, most commonly wages and redundancy pay, employees can apply to the Insolvency Service to recover some of the money owed to them from the taxpayer.

Employees can claim a maximum of eight weeks unpaid wages capped at £643 per week.

The Insolvency Service will pay unpaid redundancy pay up to the statutory maximum of £19,290. This means some employees would still be owed more in unpaid wages or enhanced redundancy pay.

Sutton said some employers are also delaying paying staff that are made redundant, despite remaining solvent, meaning the wages owed are likely much higher than the £250 million claimed.

She said: “Many people have been dipping into their savings during the cost of living crisis and are at risk of financial disaster if they do not get paid in full and on time. We are seeing increasing numbers of cases where employers cannot afford to pay wages and statutory redundancy pay, let alone enhanced redundancy that many employees expect and rely on. 

“However, in many cases these businesses are still solvent, and so will continue to trade but try to delay paying their staff, leaving many employees with little recourse other than to pursue their employer for payment by bringing claims in the employment tribunal or courts. Payments made by the Insolvency Service are likely just the tip of the iceberg.”

Read more: Bankruptcy and redundancy: how to communicate with staff

The figures come as recruitment agency Randstad found 42% of workers in the UK are worried about losing their jobs, up from 28% last year.

Victoria Short, CEO of Randstad, told HR magazine that a stagnant labour market, high inflation and high living costs have combined to make UK workers particularly anxious.

Short said: “Workers in the UK are being battered by bad news. It’s quite a cocktail, and it’s hitting job confidence.

“The concerns of workers are not entirely unjustified. It’s clear the jobs market is cooling with softer than expected UK wage data out this week. This is on top of news that inflation in the UK rose in December.

“This is playing a part in the growing anxiety among workers here amid the continued cost of living crisis and pressures on employers.”

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