Here's the Q&A from the recent Restructuring & Insolvency community webinar, dealing with employees, their claims and interactions with the RPS, which took place on 31 January 2022.
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We have a case where the company has not kept any details regarding the employees’ holidays taken and we are therefore unable to confirm holidays due to employees from the company records. What is your advice if we cannot confirm holiday due with the company books and records and the submission of holiday information to the RPS?
IPs shouldn't delay sending RP14 as to RPS as employees' claims would be delayed. The webinar discussed the importance of securing data in a timely manner wherever possible, notably as it will be required to complete these statutory declarations.
ICAEW understands that the RPS expects IPs to make it aware of any insolvencies, where an IP hasn't been able to verify information from the books and records or other data.
Although not specifically mentioned during the webinar in answer to this question, Dear IP chapter 11, article 70 provides some useful reminders here, including the following:
- '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...
- 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...
- 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.
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On a day one round of redundancy - without prior consultation - is there an obligation on the IP to state that the relevant consultations have not taken place and that a protective award may be available to the employee ?
IPs may not have enough information about the company's prior activities, including complete consultation details, to be able to form a view if there may or may not be possible claims. In any event, it is for an Employment Tribunal to decide whether any pre-insolvency consultation was sufficient and meaningful. It isn't the IP who makes the decision whether a protective award will be granted, and so may not be appropriate to advise an employee whether or not to make a claim for a protective award.
An IP should anticipate they may often be specifically asked about a protective award and be prepared to point employees to sources of independent information.
IPs may also choose to direct employees generally to sources of independent information and support and / or may reference it in initial information sent to creditors or in FAQs.
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There used to be a fund that employers could apply to for financial support making redundancy payments, when not in a formal insolvency situation, but unable to meet the costs. Is it still available?
Yes, although our understanding is it is difficult to secure any funds from it and may be a time consuming and difficult process.
Nevertheless, IPs and other advising members may find it appropriate to bring to a Board's attention.
Employers who wish to apply for support must be able to provide evidence that they can't afford the statutory redundancy pay and also that they've tried other sources of funding. More information can be found at https://www.gov.uk/government/publications/financial-assistance-for-employers-unable-to-pay-statutory-redundancy-payments.
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Quite often, the RPS payments to employees appear mis-calculated. How should IPs deal with under or overpayments by it?
An employee should challenge any errors made by the RPS directly with it, and not with the IP (although the IP could also challenge the RPS's calculations).
Where there may be dividends to employees, the IP should pay these based on the IP's own correct calculations.
Practically where the RPS has paid amounts that don't agree with the IP's calculations and a dividend will be paid, approaching the RPS regarding agreeing the IP's calculations may be appropriate. The IP may seek to agree how any overpayments should be dealt with. This will allow the RPS to decide whether or not it wishes to recover overpayments from the individual. If an employee believes that they've been underpaid by the RPS, they may wish to bring an Employment Tribunal claim to deal with this, but of course this would potentially delay the IP making a distribution to creditors and so it may be that the more commercial approach would be for the IP to engage with the RPS to try and resolve matters and so avoid the need for the Tribunal involvement.
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Quite often, the RPS payments to employees appear mis-calculated. How should IPs deal with under or overpayments by it?
An employee should challenge any errors made by the RPS directly with it, and not with the IP (although the IP could also challenge the RPS's calculations).
Where there may be dividends to employees, the IP should pay these based on the IP's own correct calculations.
Practically where the RPS has paid amounts that don't agree with the IP's calculations and a dividend will be paid, approaching the RPS regarding agreeing the IP's calculations may be appropriate. The IP may seek to agree how any overpayments should be dealt with. This will allow the RPS to decide whether or not it wishes to recover overpayments from the individual. If an employee believes that they've been underpaid by the RPS, they may wish to bring an Employment Tribunal claim to deal with this, but of course this would potentially delay the IP making a distribution to creditors and so it may be that the more commercial approach would be for the IP to engage with the RPS to try and resolve matters and so avoid the need for the Tribunal involvement.
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Some IPs include in engagement letters, a reminder to Boards / directors about consultation and HR1 requirements. What's your view on doing so?
This could help demonstrate an IP has acted appropriately at all times, although at that stage, it's unlikely the IP would have the authority, or remit to give formal advice. An IP could remind directors / the Board to seek it independently.
Once appointed, an IP must make sure that statutory requirements have been complied with. If an IP cannot ascertain if any required HR1 has been appropriately filed, we recommend the IP files their own.
IPs will be aware of the recent decision of R (Palmer) v Northern Derbyshire Magistrates' Court [2021] EWHC 3013, in which the High Court held that administrators can be personally liable for a company's failure to notify the Secretary of State for Business, Energy & Industrial Strategy (BEIS) of proposed redundancies under s.194 of the Trade Union and Labour Relations (Consolidation) Act 1992 (""TULRCA"").
In that case, the IPs were in office when the company (acting through the administrators) made redundancies. The IPs didn't send form HR1 until after the Insolvency Service contacted them, following publicity about the redundancies.
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Your slides reference the different rates of tax deductible from different pay elements when the RPS makes payments to employees. What is the difference between notional and basic rates, if any?
Where an employee hasn't received statutory notice before redundancy, and the RPS makes a payment in lieu of notice, notional tax is 'deducted' from the compensatory award. This is to reflect what would have been paid in taxation if the employee had been paid under normal circumstances (i.e., not terminated), to prevent overpayment to the employee.
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Could you also confirm what tax / NI deductions should be made from any dividends for each of the elements that exceed the statutory entitlement from the RPS, including a working example if possible please?
The below example is for information only and not a substitute for tax advice and is based on the rules for England and Wales
When the RPS makes payment in relation to:
- arrears of pay
- notice pay
- holiday pay and/or
- a protective award
tax and national insurance deductions that apply can be found at https://www.gov.uk/government/publications/redundancy-payments-from-the-insolvency-service/explaining-your-redundancy-payment
Statutory Redundancy is usually tax free up to an aggregate termination payment limit of £30k with any termination payment above £30K being taxable. Further detail and worked examples can be found https://www.gov.uk/termination-payments-and-tax-when-you-leave-a-job/what-you-pay-tax-and-national-insurance-on
Arrears of Pay
- IP uses the gross payment value provided by the RPS for calculations to determine the residual balance owed to an employee
- IP applies 0T week1/month1 tax code when calculating a payment to an employee after a P45 has been issued https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye74015
- Class 1 NIC is payable (up to retirement age) https://www.gov.uk/tax-national-insurance-after-state-pension-age/stopping-paying-national-insurance
Holiday Pay
- IP applies 0T week1/month1 tax code and
- Class 1 NIC is payable
Protective Award
- If the award is taxable, the
IP applies 0T week1/month1 tax code and - Class 1 NIC is payable
Notice (statutory / enhanced) (Pay in Lieu of Notice)
- IP applies 0T week1/Month1 tax code and
- Class 1 NIC is payable
An ex-employee who believes tax/NIC deductions applied should not have been made may seek a refund from HMRC.