The short answer
When a company is liquidated, employees are usually made redundant and their employment ends. Where the company cannot pay what it owes, employees can claim arrears of pay, holiday pay, notice pay and statutory redundancy pay from the government’s Redundancy Payments Service (RPS). These payments are subject to statutory caps on the weekly amount and length of service, and certain claims also rank as preferential against the company’s assets.
For directors and staff alike, the position of employees is one of the most important parts of a liquidation. The good news is that there is a statutory safety net. This guide explains what employees are entitled to, how they claim, and the limits that apply in 2026.
Employees in liquidation at a glance
- Employment Usually ends by redundancy
- Claim through Redundancy Payments Service
- Covers Arrears, notice, holiday, redundancy
- Caps apply Weekly pay and service limits
- Some claims Rank as preferential
- Apply online Via GOV.UK after liquidation
What happens to employment
When a company goes into liquidation and stops trading, the liquidator usually has to make employees redundant. Their contracts of employment generally end, and they become creditors of the company for anything they are owed — unpaid wages, holiday pay, notice and redundancy. Where a business or part of it is sold as a going concern, TUPE may instead transfer some employees to a buyer, but in a typical insolvent liquidation redundancy is the norm.
What employees can claim, and from whom
If the company cannot pay, employees can claim from the government’s Redundancy Payments Service (RPS), funded by the National Insurance Fund. Claims cover:
- Arrears of pay — wages owed before the company failed (capped).
- Statutory notice pay — pay for the statutory notice period not given.
- Holiday pay — accrued but untaken holiday (capped).
- Statutory redundancy pay — for those with at least two years’ continuous service.
Employees apply online through GOV.UK once the company is in liquidation, using the case reference the liquidator provides.
| Claim | Through | Note |
|---|---|---|
| Statutory redundancy pay | RPS | Needs 2+ years’ service; subject to caps |
| Arrears of pay | RPS | Subject to a weekly cap and limited weeks |
| Notice pay | RPS | Statutory minimum notice, capped |
| Holiday pay | RPS | Accrued, untaken holiday, capped |
How and when payments come through
Employees do not have to wait for the whole liquidation to finish to be paid the statutory amounts. Once the company is formally in liquidation and the liquidator has confirmed the redundancies, staff can submit their claims to the RPS, which assesses and pays the statutory entitlements from the National Insurance Fund — usually within a few weeks of a complete claim. Redundancy and arrears are paid first, with notice pay typically paid after the notice period would have ended and any new earnings taken into account. Keeping payslips, the P45, and a record of holiday taken makes the claim faster. The liquidator gives employees the case reference and points them to the GOV.UK service.
Where employees rank as creditors
Some employee claims — certain unpaid wages and holiday pay up to set limits — rank as preferential debts, paid ahead of floating-charge and unsecured creditors out of the company’s assets. Anything above the RPS caps or preferential limits is claimed as an ordinary unsecured debt. Directors who were genuinely employed may also be able to claim — see who pays for liquidation with no money. For the wider process, see how to liquidate a company.
Worried about staff entitlements in a liquidation?
A licensed insolvency practitioner manages redundancies and the RPS process correctly. A confidential call explains exactly what employees can expect.
Frequently asked questions
Do employees get paid when a company is liquidated?
Where the company cannot pay, employees claim arrears of pay, notice, holiday and statutory redundancy from the Redundancy Payments Service, subject to statutory caps.
How do employees claim redundancy?
They apply online through GOV.UK once the company is in liquidation, using the case reference number provided by the liquidator.
Is there a limit on what employees receive?
Yes — RPS payments use a weekly pay cap and length-of-service limits, so the statutory amount may be less than the full contractual entitlement.
Do employees rank ahead of other creditors?
Certain wage and holiday claims rank as preferential debts, paid from company assets ahead of floating-charge and unsecured creditors, up to set limits.
Sources & further reading
- GOV.UK — Your rights if your employer is insolvent
- GOV.UK — Redundancy Payments Service / claim money if your employer is insolvent
- Insolvency Act 1986 — preferential debts (Schedule 6)
- Employment Rights Act 1996 — redundancy and notice
- The Insolvency Service — guidance for company directors
This guide is general information, not formal insolvency advice. Your situation must be assessed by a licensed insolvency practitioner before you act.