| Dear IP Publication – Update on Employment Protection Act by the Redundancy Payments Service
Company Rescue and Employment Contracts The purpose of this article is to provide guidance on issues arising from paras. 37 and 38 of Schedule B1 to the Insolvency Act 1986, where an administration order is made at a time when a company is in compulsory liquidation and the rights of employees are affected. Issue Paragraph 38 of Schedule B1 to the Insolvency Act 1986 allows for a liquidator to make an administration application in relation to a company which is in liquidation and if the court makes such an order, then it shall discharge the winding-up order in respect of the company. Similarly, paragraph 37 allows the holder of a qualifying floating charge to make an administration application if the company is subject to a winding-up order. The policy aim behind these provisions is to ensure that where a company is wound up and the liquidator (or the holder of a qualifying floating charge, under paragraph 37) considers that an administration would allow the company to be rescued or provide a better result for creditors, then an application can be made to court. This is part of the overall policy of promoting company rescue where companies that can be saved should be saved. One consequence of a winding-up order is that, unlike a voluntary winding-up, it automatically terminates the employees’ contracts of employment. This arises from the decision in Re Oriental Bank Corporation (1886) 32 ChD 366. This could obviously affect efforts to rescue a company if funds are needed to settle redundancy claims, which have to be taken away from the funds needed to pay for ongoing trading. The loss of continuity of service could also have implications for the ability of employees to exercise other employment rights. This guidance note is intended to assist practitioners in dealing with companies that have been wound up and then enter administration, and subsequently leave administration to continue trading, and considers the effects of decisions made regarding employment contracts. Recommendation Employment law, both as regards common law and the redundancy payments scheme is capable of delivering the desired outcome of the administration, provided insolvency practitioners are alert to the possible pitfalls and employees wish to co-operate. A winding-up order operates as a matter of law to dismiss employees unless, as a matter of contract, the liquidator waives the dismissal and the employees consent to that waiver. Similarly, where under the Employment Rights Act 1996 (“ERA”) the contracts are renewed or the employees are re-engaged within the meanings given by that Act, there will be no dismissal. [Comment: there are two ways under employment law to avoid the effect of a winding-up order: at common law, the liquidator must waive the discharge of contracts and the employees agree; under ERA the contracts must be renewed or the employees re-engaged in accordance with section 138] Re-engagement is not likely to avoid redundancy claims in these cases as it would not be possible to make the offer at the relevant time as dismissal arises from the making of the winding-up order. Action to Take If an administrator wants to ensure that the employees’ continuity of employment is not interrupted by the making of a winding-up order and that redundancy claims do not arise which could hamper the company rescue, then certain steps should be taken. As stated above, a winding-up order automatically discharges all employment contracts in that company by operation of case law, Re Oriental Bank Corporation (1886) 32 ChD 366. However the court accepted in that case that where a company continues its business after the winding-up order in very much the same way as it did before that event, the liquidator would be competent to waive the discharge of contracts occasioned by the making of the order. As a matter of contract, the liquidator is entitled to treat the employees as never having been dismissed. But the liquidator must make it clear that the discharge is waived and the employees must consent to the waiver, either expressly or by conduct. The other alternative is that under section 138 of the ERA 1996, the liquidator can renew an employee’s contract of employment on exactly the same terms as the previous contract (within 4 weeks of the dismissal) and obtain the employee’s consent. Detail Under the ERA, a winding-up order is treated as an automatic termination of the employee’s contract of employment because it is an event affecting the employer which operates to terminate a contract of employment [s136(5)(b)ERA]. However section 138 ERA provides that in certain circumstances, an apparent dismissal may be deemed to be no dismissal if the employee’s contract is renewed or the employee is re-engaged under a new contract of employment. Subsection (1) of that section provides that an employee shall not be regarded as dismissed where i) his contract of employment is renewed, or he is re-engaged under a new contract of employment in pursuance of an offer (whether in writing or not) made before the end of his employment under the previous contract, and ii) the renewal or re-engagement takes effect either immediately on, or after an interval of not more than four weeks after, the end of that employment. Thus, in the case of renewal, the employer need not make an offer before the termination of the previous contract whereas in the case of re-engagement, if the employer wants to avoid liability for redundancy claims, he will have to make an offer of further employment before the original employment ended, ie before the winding-up order. Re-employment, ie renewal or re-engagement will mean that there is no dismissal and consequently no entitlement to a redundancy payment. As stated above, in cases of companies where there is a winding-up order, avoidance of redundancy claims would only be possible in cases where the employees’ contracts are renewed. Harvey’s (Industrial Relations and Employment Law, para. E [1523]) preferred definition of renewal is that it occurs where “the employer agrees to treat the employee in all respects as if he had not been dismissed”. This is similar to the effect of a waiver of discharge as set out by the court in Re Oriental Bank Corporation. However, practitioners must bear in mind that the court still recognises that the employees have a right to treat a winding-up order as discharging their contracts of employment (ie as dismissal) regardless of the liquidator’s wishes, and could opt for the redundancy payment. ERA also affords employees the choice within the “trial period” to terminate the renewed contract and treat themselves as indeed dismissed [s138(2)(b)]. This applies where the terms and conditions of the contract as renewed, or of the new contract, differ (wholly or in part) from the previous terms of employment. With regards to continuity of employment, s214 ERA states that continuity is broken where, among other circumstances, a redundancy payment is made and the contract of employment is renewed or the employees are re-engaged. Harvey highlights this pitfall for employees choosing a redundancy payment because the payment will break continuity of employment for redundancy purposes. Re-employment will, for redundancy purposes, re-set the continuity clock to zero and if the employee stays on and is dismissed again for redundancy within the ensuing two years, the employee will receive no second redundancy payment. Where an administration application is considered the liquidator will need to explain carefully to employees the effect on the company’s future prospects of any decisions that they make with respect to their employment and any potential redundancy claims. General enquiries may be directed to [email protected]; Telephone 020 7291 6740 5. Insolvency Rules 1986 Rule 4.90 – Crown Set-Off – Sums Paid to former employees set off against a VAT Refund Insolvency practitioners should be aware of the decision in Secretary of State for Trade and Industry v Frid, [2004] UKHL 24, where the House of Lords considered the right of Crown set-off in liquidations Rule 4.90 of the Insolvency Rules 1986 (IR’86) governs the right of set-off between an insolvent company and its creditors, and states that “(1) This rule applies where, before the company goes into liquidation there have been mutual credits, mutual debts or other mutual dealings between the company and any creditor of the company proving or claiming to prove for a debt in the liquidation. (2) An account shall be taken of what is due from each party to the other in respect of the mutual dealings, and the sums due from one party shall be set off against the sums due from the other.” As a result of West End Networks Limited entering into voluntary liquidation and being unable to provide for the compensatory notice pay and redundancy payments, due to nine former employees under sections 35 and 188 of the Employment Rights Act 1996 (ERA’96), the Secretary of State (SoS) became liable under sections 166(1)(b) and 167(1) of that Act to pay all or part of them out of the National Insurance Fund. Consequently, under this obligation, the Secretary of State paid the employees £11,574.49 and by virtue of section 167(3) ERA’96, all of the rights and remedies of the employees against the company thus vested in her. The company was due a VAT refund and HM Customs & Excise allocated their VAT credit rateably between the three Crown claimants for outstanding PAYE and National Insurance contributions and the Secretary of State for the payments to the employees. The Secretary of State received £2,344.03 as her share and accordingly submitted a proof in the liquidation for £9,230.46 allowing for the sum received in respect of the VAT credit. The liquidator rejected the proof and the Secretary of State appealed against the decision of the liquidator. The Registrar was bound by an earlier decision of the Court of Appeal and upheld the liquidator’s decision to reject the proof in the lesser amount. A further appeal by the Secretary of State to the High Court was rejected for the same reason. Leave was granted to the SoS to appeal to the House of Lords to consider the principle. The issue to be considered was whether, in determining the company’s claims against the Crown, or the Crown’s right to prove in the liquidation, the VAT credit should have been set off against the claim of the Secretary of State under section 167(3) ERA’96. The question was thus whether the requirements of rule 4.90 IR’86 were satisfied, with the liquidator of the company contending that there was no debt owing under section 167(3) at the date of insolvency, that there was only a possibility that such a debt would come into existence afterwards. Lord Hoffman considered whether rule 4.90 IR’86 had been complied with in the circumstances of the case. There was no doubt that the liability to repay VAT existed at the date of insolvency but nothing was yet due under section 167(3) ERA’96. Lord Hoffman stated that for the purpose of rule 4.90(2), it was not necessary for the debt to be due and payable before the insolvency date; that it was sufficient that there should have been an obligation arising out of the terms of a contract or statute by which a debt would become payable upon the occurrence of some future event(s). Lord Hoffman extended this principle to cover a contingent liability arising out of statute, stating that if a statutory origin does not prevent set-off in the case of debts due and payable at the date of insolvency, he could see no reason why it should make a difference that the statute creates a contingent liability which exists at the insolvency date but only falls due for payment and is paid afterwards. In the case in point, the failure of the insolvent employer to pay was the contingency which crystallised the liability imposed on the Secretary of State by sections 166 and 167 ERA’96, whilst the payment of those liabilities, in turn, was the contingency upon which the right of subrogation depended. When it became payable, it was a debt arising out of a statutory obligation which existed before the date of insolvency and could thus be set off. Lord Hoffman concluded that, in this case, there was no difficulty in reconciling the Crown’s set-off with segregation of the various funds, as the constitutional accountability of the Crown to Parliament for expenditure of public money, means that the Crown may have to deal differently with money from different sources. All that happened was that HM Customs & Excise wrote three cheques, to the Inland Revenue, the DSS and for the Secretary of State, instead of just one cheque to the company, thus preserving the proprieties of public finance. The appeal by the Secretary of State was allowed and, after providing for the set-off of £2,344.03, the proof for the outstanding amount was accepted by the liquidator accordingly. The Insolvency Service considers that the decision would also apply in bankruptcy cases.
General enquiries may be directed to [email protected]; Telephone 020 7291 6740 6. Guidance booklet for employees/RP1 claim form. In January Redundancy Payment Directorate (RPD) wrote to all insolvency practitioners about the introduction of an updated booklet that replaced “Your rights if your employer is insolvent (PL718)”. The new booklet is called “Redundancy and Insolvency: A Guide for Employees”, which includes a tear‑off RP1 claim form. It aims to give claimants much clearer and more compact information about making a claim to a Redundancy Payments Office and the payments to which they are entitled. RPD would be grateful if insolvency practitioners would ensure that this new booklet is issued to all redundant employees rather than the old PL718 booklet, the Redundancy Payments Charter and separate form RP1. The new booklet can be ordered in the normal way from the DTI Publications Order Line. The new booklet advises applicants to apply straight away for Jobseekers Allowance or other benefits they may be entitled to. RPD will deduct any such benefits from Compensatory Notice Pay, whether or not they are claimed, so please could you reinforce this message to redundant employees when you issue the booklet.
General enquiries may be directed to [email protected] 7. Rights Of Action – Whether A Bankrupt May Make Claims To Employment Tribunals – Are such claims property rights, thus vesting in trustee, or personal rights? To draw attention to the decision in Khan v Trident Safeguards Ltd and others, [2004] EWCA Civ 624, where the Court of Appeal upheld an appeal by a bankrupt former employee from an Employment Appeals Tribunal that had decided, as a consequence of his bankruptcy, that the rights of action vested in the trustee in bankruptcy, thus denying him the right to appeal against an earlier decision of an Employment Tribunal which had dismissed his complaints. The definition of property in section 436 of the Insolvency Act 1986 includes “things in action” but not all rights of action will form part of the bankruptcy estate and vest in the trustee. Some rights of action, particularly those which are personal in nature, relating to injuries to a bankrupt’s person or feelings and without reference to his rights of property, will remain with the bankrupt because although the rights are still property within the terms of section 436, as clearly, they are things in action, they do not vest in the bankruptcy estate because they are personal. It is thus of importance to establish whether a right remains with a bankrupt or forms part of the estate in bankruptcy and vests in the trustee. Prior to his bankruptcy Mr Khan had made applications to an employment tribunal alleging racial discrimination and victimisation under the Race Relations Act 1976 against his employer and four of its senior employees. The Employment Tribunal dismissed all of the claims unanimously and an order for costs against him was made in his absence. Later Mr Khan was dismissed by his employer and he then claimed unfair dismissal and victimisation under the Race Relations Act 1976, seeking reinstatement. An Employment Tribunal dismissed this application and he was ordered to pay the company’s costs. Mr Khan filed a notice of appeal from the decisions of the Employment Tribunals alleging that his former employer had (1) racially discriminated against him; (2) victimised him; and/or (3) unfairly dismissed him. Prior to the hearing of the appeal the former employer served a statutory demand on Mr Khan in respect of its employment tribunal costs, having obtained judgment against him. In consequence, Mr Khan filed his own bankruptcy petition and a bankruptcy order was made against him. As a result of the making of the bankruptcy order, the Employment Appeals Tribunal rejected Mr Khan’s appeals against the earlier tribunal decisions stating that he did not have the status to prosecute any of the appeals as that right now vested in the trustee in bankruptcy. However, they did give him leave to appeal in all three cases. The Court of Appeal considered whether Mr Khan had the right to bring the actions in question, in spite of the bankruptcy order, because they were matters where he was seeking personal relief without reference to his rights of property. The Court of Appeal confirmed its earlier decision in Grady v Prison Service [2003] 3 All ER 745 [24], that a claim for unfair dismissal does not vest in the trustee in bankruptcy where the employee is seeking reinstatement because it is a claim directed at restoring the contractual relationship between employer and employee and is thus a personal claim. The unfair dismissal claim was therefore referred back to the Employment Appeals Tribunal to consider. As far as the claims for racial discrimination and victimisation were concerned, the Court considered whether those actions were hybrid (partly personal and in part relating to property) as defined in the case of Ord v Upton, [2000] 1 All ER 193, and thus partly vesting in the trustee, or whether they were personal. Lady Justice Arden stated that in principle, a claim for racial discrimination was a hybrid one, seeking as it does a declaration as to the rights of the parties (personal) and an order for compensation which may not be limited to compensation for injury to feelings (property). However, in this case Mr Khan had amended his claim by withdrawing or disclaiming any desire on his part to seek any remedy incorporating recovery of pecuniary loss or property right, asking instead for a declaration of discriminatory conduct and a claim for injury to feelings. She therefore felt that his claim was not hybrid and thus remained with him rather than vesting in the trustee of the bankruptcy estate. Lord Justice Buxton agreed with this reasoning although Lord Justice Wall dissented. On a majority, the Court of Appeal accordingly ruled that these matters should be referred back to the Employment Appeals Tribunal for consideration. The position would therefore appear to be that depending on what relief or remedy a bankrupt seeks in an action, the claim might be personal to him or vest as part of the bankruptcy estate. It is expected that this uncertainty will mainly appear in claims arising in the field of employment law and related issues. The Grady case left open the possibility that a fund formed from a successful unfair dismissal claim may be claimed as an asset in the bankruptcy.
General enquiries may be directed to IP POlicy Section Email: [email protected]; Telephone 020 7291 6772 8. Apportionment of Preferential Dividend between RPD and Employees – (forms RP11 & RP12) Following the repeal of Section 189 (4) of the Employments Rights Act 1996 with regard to insolvencies occurring on or after 15 September 2003, the Redundancy Payments Directorate (RPD) has equal preference with the employee- i.e. the RPD is no longer paid in priority to any other unsatisfied claims of employees. Details of this, together with examples, are included in the booklet ‘Redundancy and Insolvency- A guide for insolvency practitioners to employees’ rights on the insolvency of their employer (2005 – Eighth edition)’ which is on the Insolvency Service website www.insolvency.gov.uk . The examples in the booklet are based on a 50% dividend being declared. Please note that in respect of ‘wages’ the apportionment will apply also to instances where a 100% dividend is declared.
The change necessitates amending forms RP11 & RP12 and it is hoped the revised forms will be introduced by the end of this month. 9. Payment of cheques to the National Insurance Fund In The January 2005 the Redundancy Payments Directorate advised insolvency practitioners that from 1 April 2005 cheques should be made payable to the ‘National Insurance Fund’ and sent to the following address: Insolvency Service Finance Redundancy Payments Team 6th Floor East Ladywood House 45-46 St Stephenson Street Birmingham B2 4UZ It appears that in most cases cheques are still being forwarded to AMEY PLC. All insolvency practitioners are asked to ensure that all future payments are sent to the above address. It is intended that the employees’ payments will be handled by the Insolvency Service from July 2005. 10. Birmingham Redundancy Payments Office Although the Birmingham RPO has not physically moved premises the name of the building has changed. The address now is: Cobalt Square 83-85 Hagley Road Birmingham B16 8QG And insolvency practitioners should amend their records accordingly. 11. Payments to Employees – exchange of information The Redundancy Payments Offices (RPOs) have a target to pay 70% of employees’ claims within three weeks of receipt and 92% within six weeks, which has been met. A contributing factor to this is the good working relationship between the RPOs, Insolvency Practitioners and Official Receivers, which the Insolvency Service would like this to develop. One way could be for staff within an insolvency practitioner’s office to gain a greater understanding of the procedures in place to deal with employees’ claims in the RPO. To this end if an insolvency practitioner, or any appropriate staff, are interested in visiting a local RPO please contact the RPO manager who will be more than happy to arrange a convenient date. Equally some of the RPO staff believe that they would benefit from seeing things from the insolvency practitioner’s perspective, and the Insolvency Service would be grateful if insolvency practitioners could contact the local RPO manager if they are able to host such a visit. General enquiries may be directed to [email protected]; Telephone 020 7291 6740 12. From 1 October 2005, there is an increase in the National Minimum wage The Government has recently responded to the recommendations made in the Low Pay Commission’s 2005 Report on the National Minimum Wage. The Government have accepted.
The following is a link to the DTI employment relations website http://www.dti.gov.uk/er/nmw/index.htm .
General enquiries may be directed to [email protected]; Telephone 020 7291 6740 13. Transfer of Undertakings (Protection of Employment) Regulations 2006(‘TUPE’) (SI 2006/246) These new regulations implement EC Council Directive 2001/23/EC and come into force on 6 April 2006. The new insolvency provisions are contained at regulations 8 and 9 and are intended to aid the rescue of insolvent businesses. Regulation 8 applies where, at the time of the transfer of the undertaking, the transferor is subject to ‘relevant insolvency proceedings’. In cases where the employees continue to work for the transferee, or are unfairly dismissed in connection with the transfer (where there is no ‘economic, technical or organisational’ reason entailing changes in the workforce within the meaning of new regulation 7(2)) it provides that some of the transferor’s pre-existing debt to those employees does not pass to the transferee but is instead met by the National Insurance Fund (‘NIF’). That is those amounts relating to unpaid wages and holiday pay that are paid out of the NIF under a statutory scheme following the insolvency of an employer. In addition, where the transferor is subject to relevant insolvency proceedings, subject to certain conditions regulation 9 provides greater scope for the transferee to vary the terms and conditions of employment of the transferring employees after the transfer takes place. The relevant conditions are in the nature of requiring the new employer to agree what are termed ‘permitted variations’ with union or employee representatives, those variations must be made with the intention of safeguarding employment opportunities by ensuring the survival of the undertaking or business, or part thereof, as a going concern, and they must not breach any statutory entitlements. In regulation 8(6) ‘relevant insolvency proceedings’ are defined as “insolvency proceedings which have been opened in relation to the transferor not with a view to the liquidation of the assets of the transferor and which are under the supervision of an insolvency practitioner”. This definition has been lifted from the EC Directive itself and is thought to include collective insolvency proceedings in which the whole or part of the business or undertaking is transferred to another entity as a going concern. Any transfers of employees within insolvency situations that are not caught by the definition of ‘relevant insolvency proceedings’ in regulation 8(6), will be subject to regulation 8(7). Under this provision, the contracts of the employees transferred will be terminated and they will not be transferred to the new employer with their pre-existing rights, but any liabilities that arise as a consequence of the termination of the contracts of employment will fall as liabilities within the insolvency. It follows that the transferee will be free to negotiate new contracts of employment with the employees transferred as they see fit. Departmental colleagues who have brought forward these regulations have indicated that they would expect most transfers of employees falling within the insolvency provisions to fall under regulation 8(6) rather than 8(7) of the new regulations. A copy of the regulations themselves may be found on-line at http://www.opsi.gov.uk/si/si2006/20060246.htm. Relevant accompanying guidance issued by the Employment Relations Directorate of the DTI is available at http://www.dti.gov.uk/er/individual/tupeguide2006regs.pdf General enquiries may be directed to [email protected]; Telephone 020 7291 6740 14. Increase in the National Minimum wage – S.I. 2006 No.2001 The minimum wage is a legal right that covers almost all workers above compulsory school leaving age. There are different minimum wage rates for different groups of workers as follows: · The main rate for workers aged 22 and over was set at £5.05 an hour. On 1 October 2006 this increased to £5.35 an hour. · The development rate for 18-21 year olds was set at £4.25 an hour. On 1 October 2006 this increased to £4.45 an hour. · The development rate for 16-17 years olds was £3.00 an hour. On 1 October 2006 this increased to £3.30 an hour. · On 1 October 2006 the rate of the accommodation offset increased to £29.05 per week (£4.15 per day). The previous rate was £27.30 per week (£3.90 per day). It is important to note that these new rates only apply to pay reference periods beginning on or after the date they came into law. The following is a link to the DTI employment relations website http://www.dti.gov.uk/employment/pay/national-minimum-wage/index.html Any enquiries regarding the above should be directed towards the National Minimum Wage Helpline on 0845 6000 678. 15. The Employment Equality (Age) Regulations 2006 – S.I. 2006 No.1031 The Employment Equality (Age) Regulations 2006 came into force on 1 October 2006. For employees’ who are dismissed on or after 1 October 2006 (that is the actual termination date, not the projected date in cases where employees’ are dismissed without notice) the following limits no longer apply · The lower age limit of 18 · The upper age limit of 65 · The taper at 64 For redundancies made before 1 October 2006, the amount will be calculated as · For each complete year of continuous service between the ages of 18 and 21, the redundant employee will receive half a week’s pay. · For each complete year of continuous service between the ages of 22 and 40, the redundant employee will receive one week’s pay. · For each complete year of continuous service between the ages of 41 and 65 the redundant employee will receive 1½ weeks’ pay. However, if the redundant employee is over 64, the total amount of the payment received will be reduced. For redundancies made on or after 1 October 2006, the amount will be calculated as · Up to the age of 21, the redundant employee will receive half a week’s pay for each completed year of service. · 22 – 40 years of age, the redundant employee will receive one week’s pay for each completed year of service. · 41+ years of age, the redundant employee will receive 1½ weeks’ pay for each completed year of service. Further information about this matter, including the updated ready reckoner, is available on the DTI website on the following reference http://www.dti.gov.uk/employment/employment-legislation/employment-guidance/page15686.html The Redundancy Payments Directorate is currently updating the RP1 form and booklets to reflect these changes but they are not expected to be ready for use until November/ December. Any enquiries regarding the above should be directed towards the Redundancy Helpline on 0845 145 0004, or email [email protected] 16. Offsetting pensions against redundancy payments Under the Redundancy Payments Pensions Regulations 1965, employers may offset pensions or lump sums which are paid immediately on redundancy or within a short time after and which satisfy the qualifying conditions. According to the amount of the pension or lump sum payable, the statutory redundancy payment due may be either reduced or extinguished completely. Employers are not compelled to offset pensions or lump sums in this way, or to apply the maximum offset. Please note that pensions may not be offset against statutory redundancy payments made to employees dismissed on or after 1 October 2006 [The Employment Equality (Age) Regulations 2006] Further information about this is available on the DTI website on the following reference Any enquiries regarding this article should be directed towards the Redundancy Helpline on 0845 145 0004, or by email to [email protected] 17. Employees right to elect union representatives to receive information from the administrator Insolvency practitioners are reminded that employees of a company in administration, where they are creditors of that company, may elect a union or other workforce representative to receive information from the administrator on their behalf. Such representatives may also attend meetings on the employee’s behalf and vote according to their wishes by way of proxy. Any such election by the employee should be made in writing. General enquiries may be directed to [email protected]; Telephone 020 7291 6740 18. Protective awards when a company is in liquidation In the case of Day v Haine and another [2007] All ER (D) 298 (Oct), the court held that protective awards made pursuant to section 189 of the Trade Union and Labour Relations (Consolidation) Act 1992 were not debts provable in the liquidation of a company in circumstances where they were made after the date of liquidation. The Court of Appeal has now set down a hearing date in this case for either 23 April 2008 or 24 April 2008. The Redundancy Payments Directorate (RPD) will continue to submit a proof of debt in respect of protective award payments. Insolvency practitioners are requested not to formally reject the proof of debt (nor request a revision of proofs of debt already submitted) pending the Court of Appeal’s judgment. If an insolvency practitioner feels unable to delay making a decision and formally rejects the claim, the RPD will have to appeal to the court against the decision and ask for the case to be stayed until the outcome of the Court of Appeal case is known. This could involve unnecessary legal and time costs. Any enquiries regarding this article should be directed towards Barbara Roberts, Senior Policy Advisor, Area 5.8, 21 Bloomsbury St, London WC1B 3QW. Telephone: 0207 637 6463, email: [email protected] General enquiries may be directed to [email protected] Telephone: 0207 637 6477 19. Payments made by the Redundancy Payments Directorate Payments made to employees of insolvent employers are those that the employer owes to the employees concerned. Once the payments are made the Redundancy Payments Directorate (RPD) expects the payments to be accepted in the insolvency. In the majority of cases the information concerning the type of debt owed, and the amount, is supplied by the insolvency practitioner on Form RP14a. As such there should be no dispute about the payments being lodged in the insolvency. If an insolvency practitioner has any doubt about an employee’s claim the doubt should be brought to the RPD’s attention before any payment is made. If after further consideration the RPD and insolvency practitioner cannot agree on eligibility for payment the claim to the RPD will be rejected on the basis that the insolvency practitioner denies there is such an employer’s debt owed. The employee will be advised of his/her right to refer the matter for determination by an Employment Tribunal. In such instances the RPD may ask the tribunal to request the appearance of the insolvency practitioner to give evidence as to why the debt is disputed. Any enquiries regarding this article should be directed towards Barbara Roberts, Senior Policy Advisor, Area 5.8, 21 Bloomsbury St, London WC1B 3QW. Telephone: 0207 637 6463, email: [email protected] General enquiries may be directed to [email protected] Telephone: 0207 637 6477 20. Redundancy Payment Directorate Inspectors visits – wages and eligibility checks Redundancy Payment Directorate (RPD) Inspectors visit insolvency practitioner’s offices to check wages and personnel records to validate claims made by dismissed employees. As most of the visits are post payment of claims it is possible that when an appointment is made by Inspectors the records are already in storage. Where this is the case it would be helpful if the records could be retrieved as soon as possible. In the event that the records are not available when the Inspector is due to visit insolvency practitioners are asked to inform the local Redundancy Payments Office as soon as possible to avoid any wasted journeys. Any enquiries regarding this article should be directed towards Barbara Roberts, Senior Policy Advisor, Area 5.8, 21 Bloomsbury St, London WC1B 3QW. Telephone: 0207 637 6463, email: [email protected] General enquiries may be directed to [email protected] Telephone: 0207 637 6477 21. Completion of Form RP14a There can be instances where there are no wages and personnel records from which the insolvency practitioner can complete a Form RP14a other than by taking the information from the claimant’s RP1 Form. In such cases the Form RP14a should be clearly noted to the effect that the information is derived only from the RP1 Form and that it has not been checked against the employer’s records. Any enquiries regarding this article should be directed towards Barbara Roberts, Senior Policy Advisor, Area 5.8, 21 Bloomsbury St, London WC1B 3QW. Telephone: 0207 637 6463, email: [email protected] General enquiries may be directed to [email protected] Telephone: 0207 637 6477 22. Miscellaneous employment issues IL1 – IP’s Redundancy and Insolvency – ‘A guide for insolvency practitioners to employees’ rights on the insolvency of their employer’. The IL1 has now been revised and will be available on the Insolvency Service web site shortly.
Annual uprating of statutory limits
The Department for Business Enterprise & Regulatory Reform (BIS) website gives full details of the current statutory limits in respect of redundancy payments. The website is updated when the limits change. The information can be accessed at the following address:
http://www.BIS.gov.uk/employment/employment-legislation/employment-guidance/page19310.html
The BIS contact for any queries concerning the limits and uprating is:
Liz Lowe, Senior Policy Advisor, Employment Relations Dispute Resolutions, BIS, 1 Victoria Street, London SW1H 0ET.
E-mail: [email protected]
New claims handling system – CHAMP (Claims Handling and Making Payments)
As you may be aware the Redundancy Payments Directorate (RPD) is moving towards a new claims handling system known as CHAMP. A working group made up of RPD staff has had numerous meetings to try to ensure that the system meets the requirements not only of the RPD but also that it will be fit for insolvency practitioner’s purposes. To that end a meeting was held in London and another in Leeds at which some insolvency practitioners were represented. This was very useful from both sides. If any insolvency practitioner wishes to participate in future workshops please could they email their contact details to:
Claims for unpaid pension contributions
There have been some instances of claims for unpaid pension contributions including details of employee’s dependents. Insolvency practitioners are asked to ensure that pension claims are only submitted in respect of employees. Any enquiries regarding this article should be directed towards Barbara Roberts, Senior Policy Advisor, Area 5.8, 21 Bloomsbury St, London WC1B 3QW. Telephone: 0207 637 6463, email: [email protected] General enquiries may be directed to [email protected] Telephone: 0207 637 6477 23. Protective awards as a provable debt in insolvency Further to Article 18, Chapter 11 of Issue 35 of Dear IP the Court of Appeal has ruled that a protective award is indeed a provable debt in an insolvency (re Haine & SoS v Day [2008] EWCA Civ 626). A copy of the judgment is available via the following link: http://www.bailii.org/ew/cases/EWCA/Civ/2008/626.html There will consequently be no changes to the Redundancy Payments Services proof of debt forms. Enquiries regarding this article may be directed towards [email protected] 24. Claims from directors The circumstances in which a director and majority shareholder of a company may be regarded as an employee (as defined in section 230 of the Employment Rights Act 1996) has been the subject of Court of Appeal decisions in re Secretary of State for Trade and Industry v Bottrill [1999] ICR 592 and re Connolly v Sellers Arenascene Ltd [2001] ICR 760 as well as the judgment of the Inner House of the Court of Session in re Fleming v Secretary of State for Trade and Industry [1997] IRLR 682. However, there have been a number of recent Employment Appeal Tribunal (EAT) decisions in which the legal approach has diverged from that stated in Bottrill and Fleming in particular. The trend of the recent EAT decisions has been to limit both the nature of the inquiry which should be undertaken by the Employment Tribunals, and the evidence which is to be regarded as relevant. There are conflicts and a consequent lack of clarity within the authorities which is deeply unsatisfactory as Employment Tribunals cannot be clear as to which approach they ought to follow. Consequently there is undoubted potential for confusion and error, and in turn unnecessary appeals. In view of this the Court of Appeal has granted the Secretary of State leave to appeal against the EAT judgment in the case of re Neufeld v Secretary of State for Business Enterprise and Regulatory Reform. The hearing date is anticipated to be in December 2008. Hopefully this will resolve the current state of confusion. In the meantime Redundancy Payments Services will continue to assess the employee status of directors in line with the Bottrill guidelines. Enquiries regarding this article may be directed towards [email protected] 25. Holiday pay claims As part of corporate governance checks undertaken on employees’ claims for payment from the National Insurance Fund (NIF) on the insolvency of an employer, Redundancy Payments Services (RPS) has designed spreadsheets to check accrued holidays due on termination of employment. Under the Working Time Regulations, employees (and workers) have the right to: 4 weeks paid leave each year before 1 October 2007; increasing to 4.8 weeks paid leave each year from 1 October 2007; increasing to 5.6 weeks paid leave each year from 1 April 2009. During the transitional periods the amount of statutory leave due will depend upon the period of the leave year that falls before and after the dates of the respective increases. The employees are also allowed to carry forward the extra statutory leave allowance into the following leave year if it is not reasonably practicable for them to take it before the end of the leave year. The spreadsheets cover the October 2007 increase, the April 2009 increase and the normal calculation for when there is no increase during the leave year. If you are interested in receiving a copy of the spreadsheet to understand how RPS assess entitlement due from the NIF in accordance with the Working Time Regulations, please telephone the RPS helpline on 0845 145 0004 or email [email protected] 26. Redundancy Payments Services (RPS) claims handling There has recently been an increase in the amount of redundancy claim related work. The amount of claims received by the RPS is up by some 35% on this time last year. This results in an inevitable increase in telephone calls from employees anxious to know what stage their claim has reached. The RPS aims to pay 78% of claims received within three weeks and 92% within six weeks. Clearly, employees expect the RPS to act on their claim as soon as the RP1 form is received. However, no action can be taken on any claim until the RP14 and RP14a forms have been received. It would therefore be helpful if claim forms are only forwarded together with the RP14 and RP14a (or later if claims are made after that time) as claims received prior to receipt of them are effectively in limbo. As insolvency practitioners will appreciate the RPS has little alternative other than to tell the enquirer that we are still awaiting information from the relevant insolvency practitioner. Enquiries regarding this article may be directed towards [email protected] 27. Fraudulent claims for payment from the National Insurance Fund (NIF) on the insolvency of an employer An unfortunate side effect of the recent increase in the redundancy payment claims workload is an increase in the number of fraudulent claims being received. These include, amongst others: · Claims from people who do not reside at the addresses shown on the RP1 and who cannot be traced · Claimants using other people’s national insurance numbers · Director’s bank accounts being nominated for receipt of payments · Rates of pay on the RP1 being higher than that shown in wages records · Maximum amounts in respect of arrears of pay and/or holiday pay being claimed when the employee has already received some or all of the money from the employer · Claims from people who do not even appear in the employer’s records · Claims from foreign workers who are working illegally Clearly no system is foolproof but in view of the increase of such instances insolvency practitioners need to be vigilant to prevent fraudulent claims wherever possible. Redundancy Payment Services (RPS) assumes that the information on the RP14a has been verified from the employer’s records before it is sent to the RPS. If there is any doubt about the validity of any claim this should be drawn to the attention of the RPS as soon as possible. Enquiries regarding this article may be directed towards [email protected] 28. Completion and signing of RP14 form There have been instances of RP14 forms being sent to the Redundancy Payments Offices (RPOs) having been signed by a member of staff rather than the insolvency practitioner him/herself. Section 187 of the Employment Rights Act 1996 requires that the information the RPO needs must be provided by “the relevant officer” and section 187 (4) of that Act defines who is the “relevant officer” – essentially it is the licensed insolvency practitioner. We have received legal advice to the effect that only the “relevant officer” should sign the RP14 form. As such, to avoid delays in having to return RP14 forms insolvency practitioners are asked to ensure that only they, as the “relevant officer”, sign the form prior to it being sent to the RPO. Enquiries regarding this article may be directed towards [email protected] 29. Payment of cheques to the National Insurance Fund (NIF) – relocation of finance team In May 2008 the Finance Redundancy Payments Team moved premises. Please ensure that cheques are made payable to the NIF and sent to: Insolvency Service Please ensure that you quote the Redundancy Payments Office (RPO) case reference number when sending these cheques. Enquiries regarding this article may be directed towards [email protected] 30. Proofs of debt – Crown set-off If a new proof of debt is requested by insolvency practitioners following notification that HM Revenue & Customs has applied Crown set-off, it would be helpful if it could be made clear that the request is as a result of the set-off, not that a new copy of the original proof of debt is requested. The Redundancy Payments Office will then recalculate the debt taking the set-off into account. Enquiries regarding this article may be directed towards [email protected] 31. The Employment Rights Act 1996 and sensitive personal information The Redundancy Payments Service (RPS) has recently conducted a review of the way it handles sensitive personal information. By that we mean how we use and store information that includes names of claimants, national insurance numbers and bank account details. From now on when RPS need to send insolvency practitioners any computer generated form, letter, fax or email we will only include the minimum of sensitive personal information to enable you to identify that it is the correct claimant, namely the full name and the last four digits of their national insurance number. We hope that this will not cause insolvency practitioners undue difficulties but we do recognise that on very rare occasions this information may be insufficient. If that is the case please contact the relevant Redundancy Payments Office case officer who will be able to assist. If RPS need to return any RP1 and RP14A forms to insolvency practitioners, which contain full personal details, we will do so only by recorded delivery mail or in instances where there are large numbers of claimants by courier or by hand. We appreciate that insolvency practitioners also hold as much sensitive personal information as RPS, and would therefore ask insolvency practitioners to ensure that this type of information is handled carefully and that when sending RP1 and RP14A forms they are addressed to the correct office or official (if known). If you have any queries about this notice, please contact Barbara Morris who is the Information Asset Owner for The Redundancy Payments Service on 0121 678 1802 or email at [email protected] 32. Employment Rights (Increase in Limits) Order 2008/3055 With effect from1 February 2009 the statutory limit on a weeks pay for the purpose of calculating a redundancy payment increases from £330 to £350. A copy of the above relevant statutory instrument is available at the following web site address: http://www.opsi.gov.uk/si/si2008/uksi_20083055_en_1 Enquiries regarding this article may be directed toward towards [email protected] 33. Advance Notification of Redundancies (HR1 form) Trade Union & Labour Relations (Consolidation) Act 1992. Employers proposing to make 20 or more employees redundant at one establishment within a period of 90 days must both consult with employees’ representatives, and also notify the Secretary of State of the proposed redundancies, at least 30 days before the first of the dismissals takes effect. If the number of proposed redundancies is 100 or more the consultation and notification must take place at least 90 days prior to the first dismissals. In practice the notification to the Secretary of State is made by completion of an HR1 form which is sent to the Insolvency Service’s Redundancy Payments Office in Birmingham. The timely completion of an HR1 is not simply a device to protect an employer against the possibility of an employment tribunal making a protective award for the failure of the employer to comply with the consultation requirements of the Trade Union & Labour Relations (Consolidation) Act 1992. It is an important tool in mitigating, as much as possible, the effect of redundancy on employees. The requirement to consult employee’s representatives about proposed collective redundancies is for the employer and employee’s representatives to have sufficient time to allow for meaningful discussions to take place to seek ways to either avoid the redundancies or at least to reduce the numbers concerned. Clearly this will not always be possible and it is for this reason that it is important that the Secretary of State is notified of the proposed redundancies at the earliest possible stage. Government has a statutory obligation to assist employees facing redundancy and in order to discharge that liability information given in HR1 forms is passed to other Government Departments and Agencies so that measures can be put in place to assist redundant employees in the event that the consultation process in not successful. Information is NOT given for any other purposes nor is it released to any outside bodies, including the media. In the current economic climate many insolvency practitioners may have been asked to advise clients on ways to restructure their businesses – not whilst formally acting as an insolvency practitioner but rather on a consultancy basis as a turnaround professional. If it is likely that redundancies are possible in any restructuring it would be prudent to remind those clients of their obligations to consult as outlined above. The client should also be made aware that the law does not absolve an employer of those obligations simply on the basis that the employer is insolvent. Enquiries regarding this article may be directed toward towards [email protected] 34. BIS – Business Link Business Link is the multi-channel business support service providing customers with access to the help and support needed in both starting and developing/restructuring a business. Employers contemplating redundancies can contact Business Link for advice targeted at getting them through a difficult period. Early intervention can help business manage a potential redundancy situation effectively and Business Link can advise on options for keeping people in employment. In the event that redundancies are inevitable Business Link can offer advice on self –employment and, together with Jobcentre Plus, entitlement to benefits like Jobseekers Allowance. Further information about Business Link can be obtained on the following web site address: www.businesslink.gov.uk/bdotg/action/home Enquiries regarding this article may be directed toward towards [email protected] 35. Claims to the National Insurance Fund There has been a marked increase in claims to the National Insurance Fund especially during the past few months. However, the Redundancy Payment Offices (“RPOs”) are still keeping their processing targets of 78% of claims paid within 3 weeks and 92% paid within 6 weeks. To help us ensure that claims are paid as quickly as possible, it would be useful if insolvency practitioners could forward the completed RP14, RP14a forms (or spreadsheet) and all available RP1 forms together as a pack. This will not only save us time, but will reduce the inconvenience to you by minimising the number of telephone calls we make to you when RP1s are sent prior to the RP14 & RP14a. It is appreciated that this will not always be possible, particularly in large cases, and if so once the RP14 & RP14a have been sent to the RPO, the RP1s can be sent in batches. You can contact the RPO to agree the arrangements for sending batches of claims. National Minimum Wage (NMW) As you may be aware, the NMW rates increased on 1 October 2008 to: Workers aged 22 and over – £5.73 per hour Workers aged 18-21 – £4.77 per hour Workers aged 16-17 – £3.53 per hour From 6 April 2009 the way HMRC Compliance Officers calculate arrears of wages owed by employers for non compliance with the NMW is changing. Full details are available on the HMRC website: Any enquiries regarding this article should be directed towards Ian Facer at Insolvency Service, Redundancy Payments Service, 21 Bloomsbury Street, London, WC1B 3QW. Tel: 0207 291 6888 email: [email protected] General enquiries may be directed to email:[email protected] 36. Employment Act 2008 – Employment Tribunal awards From 6 April 2009 the dispute resolutions provisions introduced in the Employment Act 2002 will be repealed in respect of disputes originating from that date. The 2002 provisions provide for employment tribunals to increase or decrease awards depending upon the seriousness of a party’s failure to comply with the dispute resolution procedure. Under the new regime employers are expected to handle dismissals with regard being paid to an ACAS Code of Conduct. Failure to do so may render a dismissal as unfair and employment tribunals could then increase the compensation award by up to 25%. An increase of a Basic Award for unfair dismissal can be claimed from the National Insurance Fund. Increases in the compensatory element are not payable from the Fund. In addition to unfair dismissal awards, the 2008 Act introduces new powers for employment tribunals to award additional financial loss to workers who have brought successful claims for either a redundancy payment or unlawful deduction of wages where that loss is attributable to the employer’s non-payment. Although these increases may be lodged in the insolvency they are not payable from the Fund. Any enquiries regarding this article should be directed towards Ian Facer at Insolvency Service, Redundancy Payments Service, 21 Bloomsbury Street, London, WC1B 3QW. Tel: 0207 291 6888 email: [email protected] General enquiries may be directed to email:[email protected] 37. Upgrade to RPS computer system – new email contact details The Insolvency Service is currently upgrading its computer system, including all of the Redundancy Payments Service (RPS). The RPOs e-mail addresses are now: Birmingham RPO – [email protected] Edinburgh RPO – [email protected] Watford RPO – [email protected] General enquiries may be directed to email:[email protected] 38. Notification of redundancies – working with Job Centre Plus The Insolvency Service, Jobcentre Plus (part of the Department for Work and Pensions) and R3 have been working together to ensure that when employees of a company in administration are made redundant the support provided by Jobcentre Plus (“JCP”) is made available to them as quickly as possible. This will ensure that the employees are signposted correctly and at the right time – whether that be support for making a claim for benefit, to access specialist job search support or to undertake skills analysis and subsequent up-skilling or re-training. This work follows a campaign by Phil Wilson, MP for Sedgefield, who highlighted the issue by means of an Early Day Motion in January 2009 and introduced a Private Members Bill in April 2009 requiring administrators to provide information to employment agencies (Job Centre Plus) when planning redundancies. Ministers see real value in promoting greater co-operation between insolvency practitioners and Job Centre Plus. Although they think that can be achieved without the use of legislation they strongly support closer working to ensure that people faced with redundancy get the help they need as quickly as possible. A memorandum of understanding is currently being developed between The Insolvency Service, JCP and R3. The approach is designed to work with both individual administrators and the wider sector to provide the very best service to all customers and stakeholders and where possible to impact JCP performance. This is visible through; · A different and speedy national response that adds value and enhances local rapid response processes; · Working with employers, partners and IT to link redundant workers to jobs through identifying suitable opportunities in specific locations; · Early access to employers facing insolvency and using the 90 day consultation period to better engage with the Learning and Skills Council National Employer Service and individuals to identify and accredit transferable skills; · Identifying situations quickly and working with employers and partners to minimise the number of individuals having to claim benefit by finding alternative employment opportunities; · Sharing information at the right time to enable full support to be supplied under the Rapid Response Service that JCP operates to all affected employees and; · Equipping insolvency practitioners with information to support their liaison with the employer. The principles that underpin the memorandum of understanding are that all stakeholders within the partnership will benefit from the arrangement. It is envisaged that by working more closely together JCP will be able to actively support insolvency practitioners by: · Having experts on hand to answer questions; · Releasing the pressures on insolvency practitioners as others will be on hand to manage information and employee queries; · Offering a professional rounded service between us; · Offering suitable contacts at the appropriate time; · Looking to secure premises to deliver information or specialist advice sessions where appropriate; · Helping reduce the anxiety and uncertainty felt by employees impacted by redundancy; · Supporting preventative measures to alleviate or prevent redundancy; · Acting as a single point of contact to national and localised situations as JCP will seek to engage with their local partners and organisations; · Building insolvency practitioners’ confidence in our ability to work commercially in confidence; · Enhancing the JCP/administrator image · Co-ordinating national and regional responses. A flurry of activity has taken place since we embarked on this new way of working that includes; · The building of key relationships between R3, The Insolvency Service and JCP; · The issue of a jointly prepared (R3 and JCP) briefing note to all insolvency practitioners, which gave an insight into JCP structures, processes and contact details. This also included the need to contact JCP where a company was making 20 or more redundancies in any situation dealt with by the insolvency practitioner; · Liaising with R3 regional chairs to work with JCP Regional Rapid Response Managers and mapping the best fit going forward; · Early notification between insolvency practitioners, The Insolvency Service and JCP for potential large numbers of redundancies within a company, before press announcements have been made, and; · Notification of some job losses from insolvency practitioners to national or regional JCP contacts. This improved way of working has already produced some success with JCP able to support insolvency practitioners and affected employees where they have been given prior notification of redundancies once the company is placed in administration. To date 50% of the notifications received have been at least a day before the employees have been notified of an imminent redundancy situation. In these cases JCP have been able to implement one or more of the following; · Attendance on site alongside the administrator delivering information session about benefits, job search and re-training opportunities; · The signposting of employees to future specialist information sessions where strategic partners have been engaged to deliver Skills Training Analysis, CV surgeries or general job search advice, and; · Ensuring that JCP leaflet and signposting documentation has been made available to insolvency practitioners to issue along with redundancy packs for employees. The best scenario for JCP is the earliest possible notification of impending redundancies. An excellent example of this was a call from an insolvency practitioner who had been put on standby to deal with an employer as there was a strong possibility of the insolvency practitioner being appointed as administrator the following week (8 days notice). They subsequently gave JCP enough notice and information to; · Share the information with key personnel in The Insolvency Service of the potential job losses; · Put in place a contingency plan to deal with the situation locally; · To ramp up JCP support for on site talks scheduled to take place the following week; · Impact the effect of potential new claims to the business and target staff resource to meet the increased footfall in JCP offices, and; · Enable time for potential vacancies and opportunities to be pulled together to share with the affected employees. Further information about the development of the memorandum of understanding between The Insolvency Service, JCP and R3 will be provided in future issues of Dear IP. Any enquiries regarding this article should be directed towards Sharon Lewis, Director of Redundancy Payments Services; telephone: 020 7637 6436 email: [email protected]. Enquiries regarding Jobcentre Plus should be addressed to Anne Pavey, Employer Engagement Division, Employers and Stakeholders Directorate, Jobcentre Plus 39. Consultation with employees facing redundancy and notification of proposed collective redundancies to the Secretary of State Pat McFadden, the then Minister for Employment Relations, wrote to all insolvency practitioners on 4 March 2009 regarding the need to consult with employees’ representatives as soon as possible when collective redundancies are proposed. He also reminded insolvency practitioners of the requirement to notify the Secretary of State of such proposed redundancies by forwarding a completed HR1 form to The Insolvency Service’s Birmingham Redundancy Payments Office (RPO). The HR1 can be forwarded electronically to: [email protected] Perhaps in some instances the failure to comply with either or both of these requirements is more perceived than actual. Nevertheless this matter continues to generate great concern across a wide spectrum of interested parties and we feel it is right to make insolvency practitioners aware of these ongoing concerns. The insolvency of an employer does not discharge that employer from these obligations. Immediately it is felt that collective redundancies are likely, consultation should commence and the HR1 forwarded to the RPO. This should be done by the employer once it becomes necessary to consult an insolvency practitioner, not waiting until an insolvency practitioner has actually been appointed. If an employer genuinely believes that open consultation could jeopardise the business the employees’ representatives may be asked to keep details of the consultation confidential. Insolvency practitioners who are initially acting only on a consultancy basis should make every effort to persuade the client to both consult and complete an HR1 as soon as possible. If the employer fails to do so and becomes legally insolvent the consultation and notification requirement will fall on the insolvency practitioner. The HR1 is treated as commercially confidential and details are not given to any outside organisations other than government agencies that are tasked with providing help and support to redundant employees. The more notice these agencies have of proposed redundancies the more effective their actions will be. It is for this reason that early completion of the HR1 is essential. It should be remembered that the need to consult and complete an HR1 are separate from the consultation requirement under Regulation 13 of the Transfer of Undertakings (Protection of Employment) Regulations 2006 Any enquiries regarding this article should be directed towards Dave Rowan at Insolvency Service, Redundancy Payments Service, 21 Bloomsbury Street, London, WC1B 3QW. Tel: 0207 637 6448 email:[email protected] General enquiries may be directed to: :[email protected] 40. Miscellaneous employment issues Consultation with employees facing redundancy and notification of proposed collective redundancies to the Secretary of State Further to Article 39 of Issue 40 of Dear IP, insolvency practitioners should note that this issue still continues to generate a great deal of concern across a wide spectrum of interested parties. The Redundancy Payments Service therefore feel it is right to remind insolvency practitioners of these ongoing concerns and to draw your attention to the relevant statutory requirements regarding consultation and notification as set out in Article 39 of this chapter. The Work and Families (Increase of Maximum Amount) Order 2009 (SI 2009/1903) With effect from 1 October 2009 the statutory limit on a weeks pay increases to £380. A copy of the above Statutory Instrument is available at the following web site address: www.opsi.gov.uk Clarification of email address for the Birmingham Redundancy Payments Office The Birmingham RPO has two email addresses. All communications from insolvency practitioners should be sent to [email protected]. The other address, which some insolvency practitioners appear to be using, is for internal communication only. Any message sent to that address may not reach the intended recipient. Payment Processing Times It appears that some insolvency practitioners are advising claimants that it will take at least six weeks for the RPOs to process their payments. In fact the RPOs aim to process 78% of claims within three weeks and 92% within six weeks from the date the office receives the claim. There have been a number of telephone calls from claimants to the RPO enquiring about the processing time and this is having an impact on the speed of processing claims. It would be helpful if insolvency practitioners would advise claimants of the RPO targets and ask them not to ring the RPO unless it is necessary – i.e. to notify a change of address, bank details etc. Due to the high volume of claims still being received, the RPOs are not taking telephone calls between ten and eleven o’clock in the morning and between two and three o’clock in the afternoon. This is to allow staff time to process claims. If insolvency practitioners need to contact an RPO during these hours an e-mail can be sent to the RPO and a case officer will ring back as soon as possible. Any enquiries regarding this article should be directed towards Ian Facer, Redundancy Payments Service, 21 Bloomsbury Street, London, WC1B 3QW. Telephone: 020 7 291 6888 email: [email protected] General enquiries may be directed to: [email protected] 41. Wages check visits Insolvency practitioners will be aware that one of the responsibilities of the Redundancy Payments Offices (“RPOs”) is to ensure that payments made from the National Insurance Fund are made in accordance with the legislation governing such payments. One way of doing this is to carry out a check of a company’s wage records held by the insolvency practitioner. On occasions when inspectors contact an insolvency practitioner to arrange a wages check, especially if it is one they haven’t visited for a while or the practitioner’s staff are new to employment issues, they are surprised that the RPO wants to see the wages records and question the inspector’s authority. An Inspector’s authority is covered by sections 169 and 190 of the Employment Rights Act 1996. Insolvency practitioners are asked to ensure that their staff understand the scope of the inspector’s authority and assist them wherever possible. The RPOs appreciate the current arrangement of not having to give written notice to inspect these records. This benefits both the RPOs and the insolvency practitioner by ensuring payments are made to employees as soon as possible. Any enquiries regarding this article should be directed towards Ian Facer, Redundancy Payments Service, 21 Bloomsbury Street, London, WC1B 3QW. Telephone: 020 7 291 6888 email: [email protected] General enquiries may be directed to: [email protected] 42. Redundancy Payments Service – new claims handling system As you may be aware the Redundancy Payments Service (‘RPS’) has been developing a new claims handling system known as CHAMP (Claims Handling and Making Payments). The project team has had a number of meetings with the Employment Rights Act Committee (‘ERAC’), which is an organisation that represents insolvency practitioners’ staff involved in dealing with employee claims under the Employment Rights Act 1996. The aim of these meetings is to try to ensure that the system meets the requirements not only of the RPS but also that it will be fit for insolvency practitioners’ purposes. CHAMP will completely change the way we work bringing efficiency savings and improved customer service. The expected “Go Live” date is during the spring of 2010. This article lists some of the main changes CHAMP will bring for both RPS staff and insolvency practitioners, particularly those staff dealing with employee’s claims under the Employment Rights Act 1996. In preparation, we are introducing new forms prior to go live; some of you may already have seen these via ERAC. This will enable RPS staff and insolvency practitioners to become familiar with them and old stock can be removed from circulation. We will be using OCR (Optical Character Recognition) technology to “read” the forms electronically, and therefore the layout of the forms needs to change so that there is enough space to answer the questions clearly and get the best possible results from the OCR process. This will reduce delays in processing claims because the new forms layout will ensure we have all the information we need in the right format. The new forms have been specially designed for the OCR process, and for that reason we can only accept original forms, not copies. The RP1 claim form will become a more comprehensive document in thirteen parts over twelve pages and will include information relating to each question to help claimants to understand the claim process and enable them to complete the form more accurately. The forms are also in a format to optimise optical character recognition (OCR) when the form is scanned into CHAMP. It is intended that completed RP1 claim forms should be sent in the first instance to the insolvency practitioner and then to the RPS scanning centre. The RP2 and other forms such as the RP15 will follow a similar format. The RP14 will also be in the new format but the content will be very similar to the current form, however the RP14A will be considerably different requiring more detailed data for each employee. For example you can enter details of up to four periods of Arrears of Pay, and up to three periods of Holiday Pay owed, where these are relevant. By collecting this information up front, we can reduce processing delays and verify claim entitlements. Initially this may seem like extra work but the process of submitting the information on line will
speed up the whole process for both insolvency practitioners and RPS and benefit employees, thus reducing phone calls. We are providing a facility for insolvency practitioners to upload a file into CHAMP containing the RP14A information which will avoid the need to re-enter it. We have been talking to software providers such as Turnkey with a view to them being able to generate this file automatically. The data from the forms will automatically be read by CHAMP and matched to the data from the RP1 and CHAMP will highlight any mismatches. One of the biggest changes is that we can only accept the RP14A handwritten on our pre-printed form, completed online or using the file transfer method. Insolvency practitioners will no longer be able to generate their own RP14A-like forms, as the OCR process will not be able to “read” the information unless our forms are used. All documents, including claims will be scanned and filed electronically, the original paper documents will be destroyed and RPS staff will work from scanned images. The new process will enable RPS to submit claims to our finance office for payment throughout the day rather than in one pay file and we will be able to access calculation details prior to payment. Another major difference will be that RPOs will no longer have geographical boundaries. We will retain four operational units in Watford, Edinburgh and two in Birmingham but each office will deal with claims from across the country. Thus all insolvency practitioners will deal with RPS staff in all four locations. When you submit an RP14 you will be told which RPO the case has been allocated to. We will retain our team of inspectors who will continue to carry out random checks of wage records and additional enquiries as required. Under CHAMP, as the process is more automated the level of routine checking will be increased. In February 2010 we will be delivering a series of presentations around the country to give insolvency practitioners and their staff a more detailed overview of the changes with the opportunity to ask questions. The proposed dates and locations are : Birmingham Wednesday 3rd February (confirmed) Bristol Wednesday 10th February Manchester Wednesday 17th February (confirmed) Edinburgh Wednesday 24th February (confirmed) London Wednesday 3rd March (confirmed) Norwich Wednesday 10th March
Final confirmation of the dates and locations will be issued early in the New Year along with invitations.
Any enquiries regarding this article should be directed towards Email: [email protected] General enquiries may be directed to: [email protected] 43. Memorandum of Understanding between R3, Jobcentre Plus and The Insolvency Service To assist employees facing the prospect of redundancy, a Memorandum of Understanding (MOU) was signed by R3, Jobcentre Plus and The Insolvency Service on 22 October 2009. The background to the development of the MOU and the adoption of a partnership approach was discussed in a previous edition of Dear IP (Issue No 40, July 2009; Chapter 11 Employment Issues, Article 38). The MOU is published on the Insolvency Service’s website at the link below: The MOU outlines how insolvency practitioners dealing with struggling businesses should work with Jobcentre Plus to enable them to act quickly to support individuals affected by redundancy. This will help to ensure that those affected are given rapid access to information and services that will assist them to identify new job opportunities, get access to training, or to claim benefits. Jim Knight MP, the Employment Minister, in commenting on the MOU stated: “It is important that we don’t wait for someone to lose their job before we start to help them. The pre-redundancy service Jobcentre Plus offers has helped thousands of people to get new jobs quickly – stopping a short term difficulty becoming a long-term problem.” An operational delivery plan – which underpins the MOU – was also agreed by the three parties. At the first of the quarterly reviews of this plan in January, there were concerns about the level of compliance by insolvency practitioners. Although the MOU is voluntary, it is vital that insolvency practitioners abide by its principles as a failure to do so is likely to have a detrimental impact on affected employees. Any enquiries regarding this article should be directed towards Steve Lamb, IP Policy Section, 21 Bloomsbury Street, London WC1B 3QW. Telephone: 020 7637 6698, email: [email protected] General enquiries may be directed to [email protected] Telephone: 0207 291 6772 44. Consulting with employees facing redundancy Insolvency practitioners have been informed on a number of occasions of the legal requirement under the Trade Union & Labour Relations (Consultation) Act 1992 to consult and notify in connection with proposed collective redundancies (see Dear IP Articles 33, 39 and 40 of Chapter 11). Two recent Tribunal decisions in the administration of ‘Nortel’ have provided further clarification on issues previously raised. In particular, the Employment Tribunal in England & Wales were of the view that it is incorrect to state that there is a conflict between the interests of creditors and the duty to consult with employees. They commented that the duty to protect creditors’ interests does not give the administrator any ‘fiat’ to ignore legal obligations which might impact on the financial interests of the creditors. Administrators must comply with their legal obligation to consult and notify and it is therefore a question of balancing the competing interests of the creditors and employees in the particular circumstances in such a way to ensure compliance with the legal obligations. This balancing is similar to the duty of an office holder to comply with environmental or health and safety legislation whilst at the same time giving due regard to the interests of creditors. It is also interesting to note the comments made by the Industrial Tribunal conducted in the Northern Ireland jurisdiction in relation to circumstances where there are practical constraints on full consultation. The Tribunal indicated that a ‘high quality consultation process’ could still take place within a period of much shorter duration than the full statutory requirement. In short, effective and meaningful consultation must still take place even where there are practical difficulties in doing so. Where such consultation occurs, this may enable a Tribunal to consider whether to reduce or even extinguish a protective award, which, in turn, would lessen the burden on public funds. The Insolvency Service website contains guidance for insolvency practitioners on employment rights claims. It recommends that, where appropriate, an insolvency practitioner consulted about insolvency should advise the employer to start the required redundancy process immediately so that it is in motion at the time of their appointment. It is also considered good practice to document this and additionally refer the employer to the consequences of non-compliance. Where appointed as officeholder, the insolvency practitioner should immediately review what steps have been taken in relation to this process and ensure that effective consultation is either commenced at the earliest opportunity, or it continues to take place. It is appreciated that the insolvency practitioner may well need to operate within a tight time frame but even where there is a degree of uncertainty in respect of possible redundancies the consultation process should begin and it should include ways of: · avoiding the redundancy situation or dismissals; · reducing the number of dismissals involved; and · mitigating the effects of any dismissals. It is a question of employers and/or officeholders and employee representatives working together to try to find common solutions. In tandem with the above, Jobcentre Plus should also be notified as they can provide support through a rapid response function that can be mobilised on the same day as any redundancies are announced. The support on offer includes help and advice about the labour market, how to search for jobs as well as information about benefits and tax credits. It is pleasing to note that Jobcentre Plus consider that there has been an improved level of co-operation through the Memorandum of Understanding which was agreed between themselves, The Insolvency Service and R3 to assist in this process. Any enquiries regarding this article should be directed towards Steve Lamb, IP Policy Section, 21 Bloomsbury Street, London WC1B 3QW. Telephone: 020 7637 6698, email: [email protected] General enquiries may be directed to [email protected] Telephone: 0207 291 6772 45. Introduction of CHAMP claims handling system The introduction of the CHAMP (Claims Handling and Making Payments) computer system is due to go live early 2011. The new system has been designed to apply the statutory limit to payments from the National Insurance Fund under the 7 day week principle whereby entitlement is apportioned over an actual week (7 days) as opposed to a persons ‘working week.’ This does not affect the way in which the employer calculates unpaid entitlement due under the contract of employment, e.g. the normal ‘working week’ principle. The Redundancy Payments Service will issue an explanatory note on how claims are to be calculated before Champ is introduced. Any enquiries regarding this article should be directed towards Dave Rowan at Insolvency Service, Redundancy Payments Service, 21 Bloomsbury Street, London, WC1B 3QW. Tel: 0207 637 6448 email:[email protected] General enquiries may be directed to: [email protected] 46. Claims from directors for payments from National Insurance Fund Redundancy Payments Offices have been contacted by certain directors of insolvent companies concerning approaches that have been made to them by outside organisations offering assistance in the completion of claim forms RP1 & RP2. A percentage of the amount the director receives from the National Insurance Fund is then claimed as their fee. In the vast majority of cases there are no issues concerning directors’ claims and they are paid accordingly. The Redundancy Payments Office takes the view that if anyone needs advice on completion of any claim form they can get such help, without incurring any expense, either from the Redundancy Payments Office, the insolvency practitioner, or organisations such as the CAB. Any enquiries regarding this article should be directed towards Dave Rowan at Insolvency Service, Redundancy Payments Service, 21 Bloomsbury Street, London, WC1B 3QW. Tel: 0207 637 6448 email:[email protected] General enquiries may be directed to: [email protected] 47. Minimum wage raised from October The National Minimum Wage Regulations 1999 (Amendment) Regulations 2010 raise the NMW from £5.80 to £5.93 as from 1 October 2010. They also make other changes:
The regulations are available at the following link: http://www.legislation.gov.uk/uksi/2010/1901/contents/made Any enquiries regarding this article should be directed towards Dave Rowan at Insolvency Service, Redundancy Payments Service, 21 Bloomsbury Street, London, WC1B 3QW. Tel: 0207 637 6448 email:[email protected] General enquiries may be directed to: [email protected] 48. Redundancy Payments Service new claims handling system – CHAMP (Claims Handling and Making Payments) Hopefully by now you will all be aware that Redundancy Payments Service (RPS) will soon be introducing a new computer system which we hope will speed up our claims processing. The system is called CHAMP (Claims Handling and Making Payments). Earlier in the year we delivered a series of presentations to insolvency practitioners in a number of locations around the country. In January and February 2011 we will be delivering a further round of presentations for those who missed the earlier ones and also to update everyone on progress, including the introduction of the new claim forms and the roll out process. CHAMP will drastically change the way we work bringing efficiency savings and improved customer service. The expected “Go Live” date is March/April 2011, once a definite date is known we will issue a further update providing more specific detail. Development has progressed well and final user acceptance testing will take place prior to go live to fully test all aspects of CHAMP. The purpose of this article is to update you on progress and changes that will impact on you in the coming weeks, to provide details of the dates and locations of the presentations and to invite you attend or send representatives along. Introduction of new forms You will by now have started to receive the new RP1 claim forms when you place an order with EC Logistics. These are designed to enable scanning and Intelligent Character Recognition (ICR). We are introducing these forms prior to CHAMP going live so that they are in general circulation and everyone is familiar with them. Once CHAMP is live we will only able to process claims made on the new ICR forms. It will be appreciated if you can start to use the new forms as soon as you receive them but please send them to the RPO dealing with the geographical area in which the insolvent business is based (as you do now) and not to the address on the back of the form as this is the address of the scanning centre which will not be in use until immediately before CHAMP itself goes live. Please feel free to cross this address through for now so claimants don’t return the forms directly to the RPS, there is also space for you to stamp the form with your office address. We will issue a further instruction advising you when to start sending the forms to the new RPS address. We will not be printing any further copies of the old Guide To Redundancy Payments containing the old claim form although an update version will be available on the Insolvency Service website. The new RP1 forms contains all the information that the ex-employee needs to fill the form in and we have also produced a double sided fact sheet for you to issue to redundant employees with the new RP1 claim form. The fact sheet is available electronically or via our website. Submission of RP14A data. Once CHAMP is live, insolvency practitioners will be able to submit RP14 and 14a information in two different ways. Our original plan was that insolvency practitioners would be able to submit the RP14A data by accessing an online ‘portal’ but development of this has been delayed due to Government funding restrictions. Therefore, following consultation with insolvency practitioner representatives from the Employment Rights Act Committee & Employment Rights Act Forum Groups we are developing a spreadsheet which insolvency practitioners can complete and send to us by logging on to a website. This will be demonstrated at the presentations. The use of the spreadsheet will be introduced when CHAMP goes live and again we will issue further guidance about how to use this. Alternatively there are new ICR forms for submission of the RP14 and 14a information and these will be released in the new year. Introduction of seven day week The statutory limit for arrears of pay and holiday pay claims should be calculated for part weeks using a seven day week. Introduction of this change has been deferred to coincide with the introduction of CHAMP. The new claim forms include information to enable CHAMP to do this. A short guidance note on how the RPS will be applying the rules relating to the seven day week will be issued shortly. Implementation Watford RPO will be the first RPO to go live with CHAMP, followed by the two Birmingham offices and then Edinburgh. In preparation for this we will be issuing further instruction about where to send documents on existing Chirps cases and new CHAMP cases in the lead in period. There will be a period of approximately seven days at each RPO site where claims cannot be processed prior to go live. Regional Presentations Each session will last for approximately one hour with an opportunity to ask questions. The dates and locations of the presentations are as follows :
Leicester Thursday 13th January 2011 Official Receivers Office, The Insolvency Service, 4th Floor, Wellington House, Wellington Street, Leicester LE1 6HL One session at 11.00 a.m.
Cardiff Wednesday 19th January 2011 Official Receivers Office, The Insolvency Service, 3rd Floor, Companies House, Crown Way, Cardiff. CF14 3ZA One Session at 11.00 a.m.
Manchester Thursday 20th January 2011 Official Receivers Office, The Insolvency Service, 2nd Floor, 3 Piccadilly Place, Manchester M1 3BN One session at 11.00 a.m.
Edinburgh Thursday 27th January 2011 Redundancy Payments Office, The Insolvency Service, Ladywell House Ladywell Road, Edinburgh EH12 7UR One session at 11.30 a.m.
Birmingham Wednesday 2nd February 2011 Official Receivers Office, The Insolvency Service, Cannon House, 18 Priory Queensway, Birmingham, B4 6FD Two sessions one at 11.00 a.m. and one at 2.00 p.m.
Southampton Thursday 3rd February 2011 Official Receivers Office, The Insolvency Service, Suite A Waterside House, Town Quay, Southampton SO14 2AQ One session at 11.00 a.m.
London Thursday 10th February 2011 Official Receivers Office, The Insolvency Service, Conference Centre, 21 Bloomsbury Street, London WC1B 3SS Two sessions one at 11.00 a.m. and one at 2.00 p.m.
Plymouth 18th February 2011 Official Receivers Office, The Insolvency Service, Cobourg House, Mayflower St, Plymouth PL1 1DJ One session at 11.00 a.m.
Newcastle Thursday 24th February 2011 Official Receivers Office, The Insolvency Service, 1st Floor, Melbourne House, Pandon Bank, Newcastle upon Tyne NE1 2JQ One session at 11.30 a.m.
If you wish to attend any of the presentations please indicate your booking requirements and details on the form overleaf. This should be returned by post or e-mail to the address below. Any enquiries regarding this article should be directed towards Susan Larkin at Redundancy Payments Service, Cobalt Square 83 – 85 Hagley Road, Edgbaston, Birmingham B16 8QG. Telephone: 0121 678 1801, email: [email protected]
CHAMP Presentations to Insolvency Practitioners 2011
To : Susan Larkin Redundancy Payments Service, Cobalt Square 83 – 85 Hagley Road, Edgbaston, Birmingham B16 8QG
Telephone: 0121 678 1801
email: [email protected]
Organisation ———————————————————————————
Location of Presentation you wish to attend ————————————————-
Time of presentation ————————————————— (Birmingham and London only)
Names of all those attending ——————————————————————-
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Main contact name and details ———————————————————- (including e-mail address)
Please return to Birmingham RPO by Friday 31st December 2010
49. Redundancy Payments Service new claims handling system – CHAMP (Claims Handling and Making Payments) Please can you ensure this information is passed on to the people in your organisation who handle Employment Rights Act claims. You will be aware from previous articles in Dear IP that the Redundancy Payments Service (RPS) has been developing a new computer system for recording and processing claims. The dates for implementation of the new system have been confirmed as follows:- RPO Watford – Monday 15 August 2011 RPO Birmingham – Monday 24 October 2011 RPO Edinburgh – Monday 14 November 2011 The reason for the long delay between RPO Watford and Birmingham is to ensure the system is working effectively before it is rolled out across all sites. This will also mitigate any potential disruption in processing claims during the implementation period. We would request that insolvency practitioners, and their agents, continue to address case and claim related post, including claim forms, to the respective office addresses until further notice. Submission and availability of claim forms As you will be aware the RP1 forms have been redesigned to enable ICR (Intelligent Character Recognition) and as such the RPS can only accept originals, as photocopied or downloaded versions of the forms cannot be ‘read’ by the ICR software. The RP14, RP14a, RP15, RP15a have also been redesigned as ICR forms. These are in stock and are already available from our usual supplier, EC Logistics, who can be contacted by email at[email protected] or by telephone at 0845 0150 010. Supplies of any of the forms will not be available from any of the RPOs. RP2 form are also ICR documents and will continue to be issued to claimants as notice periods expire, as is done now. Testing of the scanning and ICR processes has revealed a few issues, which we would be grateful for your assistance with, when submitting documents to us in future.:-
We will be undertaking a full review of the new forms approximately six months after the new system is in place so that any improvements or refinements can be planned. If you have any comments on how we can improve the design or layout of the new forms please send details to [email protected] for inclusion in the review. Submission RP14 and RP14a There will be a choice of methods available for the submission of RP14 and RP14a information to the RPS when the new system is in place. The new style paper form, which can be scanned and information automatically extracted from, is already in circulation and available from EC Logistics in the usual way. The new form requests more information than has previously been supplied so that claims can be processed more quickly upon receipt, with less need to seek further information from either the claimant or the insolvency practitioner. The new system requires more detailed breakdown of employee information plus specific information in relation to the application of the statutory limit. The main changes are:-
These additional details ensure that payments due are correctly assessed within the respective payment category and statutory limit. An electronic means of submitting the information has also been developed, which will allow insolvency practitioners and their agents to upload the information via a website. This was circulated to insolvency practitioners recently via email including a full copy of the guidance for using the electronic upload and the relevant spreadsheets and schema that you can use.
10) Registration for RP14a upload Insolvency practitioners will be automatically registered through their IP registration number. Further information will be issued separately. Application of the Statutory Limit As you may be aware, legal advice we have received regarding the application of the statutory limit means that we will be changing the way ‘part week’ payments are calculated when applying the statutory limit, when we move to the new system. Detailed information on these changes is contained in a guidance note that is being sent out under separate cover. Any enquiries regarding this article should be directed towards Elizabeth Bird, Insolvency Service, o/s Redundancy Payments Office, 9th Floor, Cobalt Square, Birmingham, B16 8QG telephone: 0121 678 1807 email: [email protected] 50. Communication with Redundancy Payments Service (RPS) Following completion of the rollout of CHAMP all correspondence to the RPS should now be sent to the following central address: Redundancy Claims Please note that any post sent to the various RPO street addresses will incur a delay in processing because it will have to be forwarded by the office to the PO Box address. E Mail Communication A new email address became effective on 20 February 2012 and all general emails should now be sent to the new address: [email protected] Old email boxes have been set up to redirect emails to the new address but will be closed after six weeks. If an email is case specific then it should be addressed to the case officer dealing with that case, details of which should be on any correspondence received. Some insolvency practitioners have advised RPS that they have not received an e mail advising them who is dealing with their case. The function does work but there are two reasons why this is intermittent.
RPS are considering a better solution to this at present. Phone calls RPS have experienced a significant increase in phone calls to all offices, and particularly to Birmingham due to claimants associating the PO Box address with the office to contact regarding their claim. We are reviewing our call handling systems and also expect volumes to reduce now that all offices are on CHAMP. In the meantime we would like to thank practitioners for their patience and request that calls are not routed through the customer service helpline which can only accept calls for general enquiries. If calls are made to this number they will be referred from there to the direct line of the case officer. If a call is case specific it should be directed to the case officer, whose phone number is displayed on all correspondence. Factsheet for issue with RP1 forms This fact sheet is available to down load from our website on the following link and RPS would be grateful if practitioners would issue these with the RP1 Forms Any enquiries regarding this article should be directed towards Barbara Morris, telephone: 0121 678 1802, email: [email protected] General enquiries may be directed to email: [email protected] 51. Insolvent Trade Unions and Employers’ Associations – Annual Returns The Certification Officer (CO) is the office holder to whom all trade unions and employers’ associations must send annual returns for their financial affairs. The statutory requirement to submit such returns is found in Section 32 of the Trade Union and Labour Relations (consolidation) Act 1992. Failure to comply is an offence which is deemed to have been committed by both the organisation and the individual(s) responsible for compliance. The annual returns must contain specified accounts and contain a report from auditors qualified as such under the Companies Act 2006. The return is to be made on a form provided for the purpose. The CO is required to, and does, make the returns available for public inspection. In addition to providing access to the physical documents on request, all annual returns received since 2003 are available to view or download from his website, www.certoffice.org. The statutory requirement to provide the returns applies for the duration of the organisation’s existence, so that even if the organisation goes into administration or enters insolvency procedure the statutory requirement would continue and would only not apply from such time as the organisation ceases to meet the definition of a trade union or employers’ association or ceases to exist as a legal entity. In recent insolvencies of trade unions and employers’ associations, the CO was informed that the insolvency practitioner had difficulties in complying with this statutory duty. He noted, however, that insolvency practitioners gave certain information to Companies House in the case of insolvency corporate bodies whilst similar information is not put in the public domain for unincorporated bodies. Most trade unions and many employers’ associations are unincorporated. In the recent cases the CO decided not to prosecute having regard to the insolvency practitioners’ co-operation in providing documents which would provide the best equivalent information, such as:-
Insolvency practitioners should note the legal duty to provide an annual return and are urged to co-operate with the CO to ensure that there is a public record of the financial affairs of a trade union or employers’ association at the conclusion of any insolvency process. The CO reserves the right to prosecute in cases on non-compliance. Any enquiries regarding this article should be directed to the Certification Office, telephone: 020 7210 3734; email: [email protected] 52. Change to the Statutory Limit Insolvency practitioners are advised that with effect from 1 February 2013, the Employment Rights (increase of limits) Order 2012 raised the statutory limit on a weeks pay for the purpose of calculating a redundancy payment from £430 to £450. Any enquiries regarding this article should be directed towards Sarah Saunders at Redundancy Payments Service Policy PO Box 15424, Birmingham, B16 6JJ. Tel: 01452 338 039. Email: Sarah.Saunders @insolvency.gov.uk General enquiries can be directed to: [email protected] 53. Employment Rights (Increase of Limits) Order 2014 The Employment Rights (Increase of Limits) Order 2014 will raise the statutory limit on the maximum amount of a week’s pay for the purpose of calculating a redundancy payment from £450 to £464 from 6 April 2014. The Order is available at the following link: http://www.legislation.gov.uk/uksi/2014/382/contents/made Any enquiries regarding this article should be directed towards Jessica Bradbury, Redundancy Payments Services, PO Box 16685, Birmingham, B2 2lX, telephone: 01792 479744, Email:[email protected] General enquiries may be directed to email: [email protected] 54. Holiday Pay Ruling: Bear Scotland Ltd & Ors v Fulton and Ors The Redundancy Payments Services (RPS) has been notified of the judgment of the Employment Appeal Tribunal in Bear Scotland v Filton, and will continue to process claims in the usual way until expiry of the appeal period. RPS has sought advice, and once this advice has been considered and, depending on the outcome of any appeal, it intends to issue further information to practitioners on this matter in the New Year. Any enquiries regarding this article should be directed towards Jessica Bradbury, Redundancy Payments Service, PO Box 16685, Birmingham, B2 2LX telephone: 0121 380 3477 email: [email protected] General enquiries may be directed to email [email protected] 55. Holiday Pay claims handling by the Redundancy Payments Service Following the decision in Bear Scotland v Fulton, where the Redundancy Payments Service (RPS) identifies that an individual is contractually obliged to work overtime and is owed holiday pay taken, a 12 week average for overtime worked will be calculated and applied to those days. It should be noted that this only applies to the first 20 days of annual leave taken in each holiday year. Procedurally, as there is no way to indicate two separate pay rates on the RP14, we would ask that cases of this nature are dealt with via an additional email to the case handler. Initially, while we assess the number of cases this applies to, we would ask that practitioners email the Policy team about any affected cases. Any enquiries regarding this article should be directed towards Jessica Bradbury, Redundancy Payments Service, PO Box 16685, Birmingham, B2 2LX telephone: 0121 380 3477 email: [email protected] General enquiries may be directed to email [email protected] 56. Collective Redundancy Consultation for Employers facing Insolvency: Call for Evidence On 23 March 15 the Insolvency Service launched a call for evidence on collective redundancy consultation in insolvency situations. This call for evidence invites stakeholder’s views on understanding of the current requirements and their benefits, the factors that facilitate or inhibit quality consultation, the role of directors and the ways in which government and industry can work together to ensure that quality consultation and timely notification takes place. The intention of this call for evidence is to improve outcomes from consultation for both employers and employees. Your input to this call for evidence would be greatly appreciated and it can be accessed via the following link: Any enquiries regarding the above should be directed towards Pabitar Power, External Affairs (Policy), 4 Abbey Orchard Street, London SW1P 2HT; telephone: 0207 596 6152; email: [email protected] General enquiries may be directed to email [email protected] 57. Eligibility to claim from the Redundancy Payments Service Insolvency practitioners are advised that any employee without the legal right to work, works under an invalid contract and would have no entitlement to be paid and no civil claim can be made in respect of outstanding employment debts. As such, the Redundancy Payments Service cannot make payments in respect of employment debts which accrued at a time when an individual did not have a valid work permit. If practitioners identify any claims that might be affected by this, please contact the Policy team. Any enquiries regarding this article should be directed towards Jessica Bradbury, Cannon House, 18 Priory Queensway, Birmingham, B4 6FD, telephone: 0121 380 3477, email: [email protected] General enquiries may be directed to email: [email protected], telephone 0330 331 0020. 58. Advanced Notification of Redundancies Where an employer proposes to dismiss as redundant 100 or more employees at one establishment within a period of 90 days or less, under section 193 Trade Union and Labour Relations (Consolidation) Act 1992 (“TULR(C)A”) the employer must notify the Secretary of State of the proposal at least 45 days before the first dismissal takes place. This period is reduced to 30 days where the number of employees is between 20 and 99. Notice to the Secretary of State must be provided before notice is given to the employees in question. Failure to give notice to the Secretary of State in accordance with section 193 is an offence under section 194(1) TULR(C)A. On occasions where the Redundancy Payments Service receives an HR1 form (advance notification of redundancies) that appears to not comply with section 193 TULR(C)A, a written notice may be issued under section 193(5) to request further information. This may include further information as to any special circumstances pre and/or post appointment that, in accordance with section 193(7), rendered full compliance with section 193 not reasonably practicable. Early and prompt attention to any such request for further information would be much appreciated. These letters will be issued in both solvent and insolvent cases to obtain further information where it appears the form does not provide enough. Any enquiries regarding this article should be directed towards Jessica Bradbury, Cannon House, 18 Priory Queensway, Birmingham, B4 6FD, telephone: 0121 380 3477, email: [email protected] General enquiries may be directed to email: [email protected], telephone 0330 331 0020. 59. The Employment Rights (Increase of Limits) Order 2017 The Employment Rights (Increase of Limits) Order 2017 will raise the statutory limit on the maximum amount of a week’s pay for the purpose of calculating a redundancy payment from £479 to £489 from 6 April 2017. The Order is available at the following link: www.legislation.gov.uk/uksi/2017/175/contents/made General enquiries may be sent to: [email protected] 60. The Employment Rights Act 1996 and Pension Schemes Act (amendment) Regulations 2017 The Employment Rights Act 1996 and Pension Schemes Act 1993 (Amendment) Regulations 2017 (“the Regulations”) make amendments to sections 166 and 183 of the Employment Rights Act 1996 and section 123 of the Pension Schemes Act 1993 (“the Acts”). The Regulations will come into force on 26 December 2017. The Regulations bring insolvent employers that are not defined as a company, an individual, or Limited Liability Partnership, within the provisions of the Acts for the purposes of enabling their UK-based employees to make a claim for certain redundancy and insolvency related payments by the from the Insolvency Service’s Redundancy Payments Service. In practice, the Redundancy Payments Service already honours payments to the former employees of such employers. Accordingly, these Regulations will have no impact other than to formalise the position. Further guidance relating to the Pension Schemes Act 1993 will be published early in 2018. General enquiries may be sent to: [email protected] 61. The Employment Rights (Increase of Limits) Order 2018 With effect from 6 April 2018 the statutory limit one weeks pay for the purpose of calculating a redundancy payment increases from £489 to £508. A copy of the above relevant statutory instrument is available at the following web site address: General enquiries may be sent to: [email protected] 62. Directors and Rate of Pay Due to changes in employment case law over the last 10 years, the number of directors who are now deemed to be employees and are therefore entitled to payments from the Redundancy Payments Service (RPS), has significantly increased. Their remuneration can vary to that of other employees and will therefore be calculated differently. A weeks pay and dividends Payments made by the RPS are with reference to ‘a week’s pay’. A week’s pay for the purposes of S220 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 weeks 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 / directors fee from ’ a weeks pay’ means the remaining rate of pay is below the applicable National Minimum Wage (NMW), the rate of pay used by the RPS would 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 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 General enquiries regarding this article may be sent to [email protected] 63. A New Case Management System for the Insolvency Service The Insolvency Service is currently developing a new case management system using the Microsoft Dynamics 365 solution. The new system will provide a single, fully integrated platform for all of the agency’s operational business areas including its Redundancy Payments Service (RPS), its Official Receiver Services, and its civil and criminal investigation teams. Dynamics 365 will introduce up to date technological capability to support the Insolvency Service’s operations, including the ability to integrate with external data sources. At the end of January 2019 RPS will be the first of the Insolvency Service’s business areas to go live with the new case management service. Insolvency Practitioners will be impacted by this change in two main ways. Firstly, the new case management system will modernise and automate the calculation of redundancy payment entitlements, enabling RPS to respond in real time to changes to legislation and tax rules, as well as to any directions arising from employment case law. The immediate effect of this is that from the end of January the basis of the calculations of certain types of payments will change, and insolvency practitioners and their service providers may therefore wish to take action to align their own calculation models with those of RPS. Secondly, the introduction of the new case management system will coincide with a change to the way insolvency practitioners submit RP14/A forms. Instead of using the existing portal, insolvency practitioners and their agents will need to submit these forms via the online Director Conduct Report Service (DCRS), which practitioners will be familiar with as the tool for submitting information to the Insolvency Service’s Investigation and Enforcement Service. The DCRS offers a ready made and at the same time more modern, reliable and secure facility for the transmission of information relating to redundancy claims. Switching to this channel now will also enable changes and improvements to the RP14/A upload service to be implemented quickly and easily in future. In the weeks and months leading up to Go Live at the end of January, the Insolvency Service will be issuing further communications about these changes to ensure that IPs and other stakeholders have a full awareness and understanding of what they will need to do to prepare for them. General enquiries regarding this article may be sent to [email protected] 64. Update for Insolvency Practitioners on the development of the Insolvency Service’s new case management system (CMS) 1. As advised in the previous editions of Dear IP, the Insolvency Service is introducing a new Case Management System (CMS) in the first quarter of 2019, with our current planning projections putting us on target to go live on 18 March. 2. CMS will bring about changes to the way the Redundancy Payments Service (RPS) receives information from IPs and their authorised Agents on employers and redundancy claims in their insolvency cases (the RP14/A forms). CMS will also modernise and make more efficient the process of calculating redundancy payment entitlements. RP14/A submissions 3. The submission process itself will remain largely unchanged when CMS goes live, although some additional validation of the data is being introduced which will mean, for example, that correctly formatted National Insurance numbers (NINOs) will need to be entered into the RP14/A form in order for it to upload successfully. 4. The XML form schemas have been updated accordingly, so it is important that IPs and Agents observe and adhere to the data entry requirements going forward. Access to the updated forms will be incorporated into the updated guidance and instructions for the new Service. The Q&A sections below provide some further detail about the data that IPs will be required to include in the RP14/A forms. 5. The main change is that the channel for submission will switch from the portal that IPs and their Agents currently use to the online Director Conduct Return Service (DCRS), which will be renamed the Insolvency Practitioner Service (IPS) to reflect the broadening of its function to capture redundancy payments information in addition to the director conduct reports that it already processes. 6. The process for submitting Director Conduct Reports within the updated Service will be unaffected. 7. The change is driven by the fact that DCRS offers a more modern, secure and adaptable platform for the RP14/A upload than the existing portal, which was developed at the same time as the case management solution for RPS which is being replaced by CMS. The implementation of CMS now provides both the rationale and the opportunity to move to that more modern service. 8. Users will continue to be supported in resolving any problems they encounter with the uploading of RP14/A forms via the contact email address for reporting issues at [email protected] How will DCRS be adapted to take in RP14/A information? 9. As just indicated, DCRS will be renamed the Insolvency Practitioner Service to acknowledge the fact that going forward it will not just be dealing with director conduct reports. 10. More substantively, a new role of “Agent” will be will be added to the existing group of DCRS users which currently comprises IPs, Service Managers and staff. There is widespread use by IPs of third party service providers – Agents – to process, prepare and submit RP14/A forms, and therefore the updated digital service will recognise and enable this user type. 11. Current Agent firms and their nominated Service Managers will be directly authorised and set up on IPS by the Insolvency Service’s Redundancy Payments Service. This will expedite and facilitate the assimilation of the existing, relatively small community of ERA agents into the new IPS, as they already have established links and contact points with RPS. Going forward, any new Agent firms entering the market will need to arrange for an IP to make the initial approach to RPS for them to be authorised and set up on the Insolvency Practitioner Service. 12. Those IPs and IP firms who do not engage Agents to submit RP14/A forms will be able simply to submit this information based on their existing IP / Service Manager / Staff settings within DCRS. When adding new staff to carry out RP14/A uploading work, IPs will simply follow the process they are already familiar with, which includes the automatic generation of temporary passwords for first log on and registration within the system. 13. The only change otherwise from the IP point of view will be that when they and their staff log on to the Service, they will be presented with both options i.e. of submitting a director conduct report and / or of submitting an RP14/A form. The screen shot below of a prototype dashboard for IPS users illustrates this:
14. Neither the RP14/A upload process nor director conduct return report process will look or feel any different for the users once they have selected the option they need on the dashboard. 15. When a third party Agent logs on to DCRS, they will be presented with the RP14/A upload option only. The system will ensure that their user journey is kept completely separate and distinct form the IP user journey, and Agents will have no visibility whatsoever on any director conduct material. 16. Updated instructions and FAQs on the use of IPS, and / or links to this guidance, will be published on the relevant GOV.UK pages of the internet What minimum data requirements have been set for the RP14/A forms and why are they necessary? RPI4 17. The RP14 form must include the employer name and payroll contact details. 18. Users should note that the payroll contact details will be used for issuing redacted RP1s. RP14A 19. The RP14A form must show the relevant case number (CN) and, for every claimant, a validly formatted National Insurance number (NINO). Failure to enter this information will result in a failure message that will identify for the user which entry or entry requires correction, so that they can then take the necessary action and re-upload the form. HMRC guidance on NINO formatting will be incorporated into the updated instructions and a link to these is included here: https://www.gov.uk/hmrc-internal-manuals/national-insurance-manual/nim39110 20. Under the current upload service it is possible for RP14A forms to be uploaded even if the field for NINOs is left blank. This only results in delays to claims processing, as the form then needs to kept in a holding area within RPS pending further inquiries of, and correspondence with, the IP. By including NINOs as part of the set of validating data necessary for successful RP14/A uploading, we will provide a better service to our customers and minimise inconvenience to our IP partners. 21. The RPS also has a duty to report the payments it makes in the form of Real Time Information (RTI) to HMRC. Therefore the inclusion of validly and correctly formatted NINOs in the RP14/A forms will also facilitate accurate reporting for this purpose. Redundancy Payments calculations Automated calculations – the calculation engine 22. CMS will integrate with an internally developed “calculation engine”. The speed, accuracy and consistency of the calculations performed by the Redundancy Payments Service will be improved as a result of this technical development, resulting in a better and more efficient service to one of the Insolvency Service’s most vulnerable stakeholder groups. 23. Another direct result of the implementation of CMS and the calculation engine will be that it will be far easier and quicker to apply changes to the basis of the calculations in response to legislative changes and / or developments in Employment Tribunal case law. 24. CMS will hold the information relevant to the claims (i.e. RP1s, RP2s, RP14 / 14As, etc) and that information will be used by the engine to perform the calculations. The code has been made available in Open Source at https://github.com/InsolvencyService/RPSCalculationEngine to enable practitioners, agents and their software providers to clone and utilise their own version of the solution if they wish 25. The remainder of this article focuses on the technical detail of the basis of the various redundancy payment calculations, and on the extent to which the advanced functionality of CMS and its integration with the calculation engine has affected this. In particular, the functionality will enable RPS to apply real time changes to the calculations to reflect the latest tax rules emanating from HMRC and developments in employment case law. 26. Certain of the calculations and payments will remain unaffected by the implementation of CMS, including Redundancy Pay itself and payments relating to Pensions. The affected calculations, which will be discussed in the subsequent paragraphs of this article, are: • Arrears of Pay (AP) • Protective Awards (PA) • Holiday Pay Accrued (HPA) • Holiday Pay Taken (HPT) • Compensatory Notice Pay (CNP) • Notice Worked not Paid (NWNP) • Basic Award (BA) • Apportionment of Preferential Debt Arrears of Pay Calculation (AP) 27. AP payments remain subject to statutory limits – Parts XII of the ERA 1996 – Sections 184(1)(a) / 185(b) / 186. 28. Changes to the AP calculation mean there will now be an automatic selection of the most financially advantageous weeks to the claimant, rather than the last chronological weeks. The calculation works in conjunction with the Protective Award calculation (if applicable), paying the best weeks (up to a maximum of eight). 29. Where the financial value between the weeks are the same, RPS will automatically select those weeks that are within the preferential limit of 4 months prior to the date of insolvency, enabling INSS to claim the most it can preferentially and thus protecting the National Insurance Fund (NIF) by looking to maximise the return to public funds. 30. We envisage that the advanced functionality that will make it possible to automate these calculations will lead to a reduction in the amount of contact, correspondence and therefore rework that historically has resulted when claimants have approached the RPS and IPs in these cases. 31. Because RPS will be paying the best weeks (up to 8) including Protective Awards (PA) – which usually come at a later date – the debt categorisation of payments could change over time. This in turn means the RPS’s potential claim in the insolvency could change over time. 32. As now, if we have made a payment for AP at an early stage and then make a payment in respect of a PA later date, we shall take account of the earlier sums paid when making the latter payment. 33. The best weeks paid by the RPS could be a mixture of AP and PA. Protective Award Calculation (PA) 34. As indicated at paragraph 17 above, the PA calculation will sometimes interplay with the AP calculation, and the same statutory limits apply. Changes to the PA calculation mean there will now be an automatic selection of the most financially advantageous weeks to the claimant, rather than the first chronological weeks of the protective award. 35. The authority of Mann –v- Secretary of State [1999] IRLR 566 confirmed that the Secretary of State (SoS) can pay the most advantageous weeks to the claimant, but the administrative burden should be on the claimant, not the SoS, to select the best weeks. This administrative burden is now mitigated by the functionality in CMS and the calculation engine to identify the best weeks (up to a maximum of eight in conjunction with Arrears of Pay claims). 36. Again as discussed in relation to the AP calculation, the payments RPS make may change over time and that, in turn, means the potential claim in the insolvency will change. As now, if RPS had made a payment for AP at an early stage and then make a payment in respect of a PA later date, it takes account of the earlier sums paid when making the latter payment. 37. Any mitigation by way of jobseeker allowance / income support that needs to be deducted from a PA will now be applied to the whole of the protective award period, not just the first eight weeks. 38. The calculation will also deduct tax, dependent on whether the claimant’s date of dismissal and the date of the Employment Tribunal Judgment awarding the PA are in the same tax year. This approach will implement the HMRC tax guidance concerning PAs: https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim02550 39. PA payments will continue to be subject to deductions of National Insurance Contributions (NICS). 40. Where the financial value between the best weeks are the same, we shall automatically select those weeks that are within the preferential limit of 4 months prior to the date of insolvency. This in turn will allow the INSS to claim the most it can preferentially. This protects the NIF by looking to maximise the return to public funds. Holiday Pay Taken Not Paid (HPTNP) calculation 41. Holiday Pay Taken Not Paid (HPTNP) is still subject to the statutory limits found at part XII of the ERA – Sections 184(1)(c) + 184(3), 185(a) and 186 and will now be calculated and paid net of tax and NI. 42. The HPTNP calculation works in conjunction with the Holiday Pay Accrued (HPA) calculation to automatically make sure that no more than the statutory max of 6 weeks holiday pay is paid. 43. HPTNP will now automatically be included in the Apportionment calculation, removing the need for the manual creation of proofs of debt and thus making the process of generating PODs quicker and more accurate. 44. Any HPTNP in respect of a period up to four months prior to the date of insolvency will be preferential and subject to apportionment (similar to AP, PA and NWNP). This is because it is classed as remuneration for the purposes of Schedule 6 (Category 5) of the Insolvency Act 1986: https://www.legislation.gov.uk/ukpga/1986/45/schedule/6 Holiday Pay Accrued (HPA) calculation 45. HPA is still subject to the statutory limits found at part XII of the ERA – Sections 184(1)(c) + 184(3), 185(a) and 186. The calculation works in conjunction with the Holiday Pay Taken (HPTNP) calculation to automatically make sure that no more than the statutory max of 6 weeks holiday pay is paid. 46. According to the Working Time Regulations 1998 (WTR), all employees are statutorily entitled to 5.6 weeks holiday per year, up to a max of 28 days. Employees of course could have a contractual entitlement in excess of this. How many days 5.6 weeks equals is dependent on the number of days per week an employee works. E.g. 1 day per week = 5.6 days. 5 days per week = 28 days 47. Under the WTR, employees are expected to take 4 weeks holiday (up to a max of 20) for Health and Safety Purposes. How many days 4 weeks equal is also dependent on the number of days per week an employee works. E.g. 2 days per week = 8 days. 5 days per week = 20 days 48. The amount of ‘Carry Over’ holiday allowed when calculating the claimants entitlement to payments from the NIF will be limited to 1.6 x number of days per week the claimant works (up to a maximum of 8 days carry over), as follows: 1 day worked = 1.6 days maximum carry over 2 days = 3.2 days maximum carry over 3 days = 4.8 days maximum carry over 4 days = 6.4 days maximum carry over 5, 6 and 7 days worked = 8 days maximum carry over 49. Employees can carry over more holiday in excess of the 4 weeks they are legally obliged to take and in excess of their statutory holiday entitlement if they have a contract of employment that allows them to do so e.g. a 5 day week employee with an annual contractual entitlement of 35 days would take 4 weeks holiday (20 days) and carry over the remaining 15. 50. The RPS however will only recognise the carry over difference between 4 weeks and 5.6 weeks (i.e. 1.6) up to a maximum of 8 days. Any Holiday Pay Accrued owed in excess of the statutory limits will be a residual claim in the insolvency. Compensatory Notice Pay 51. Due to a change in tax law from 6th April 2018, there is a need to change the way Compensatory Notice Pay (CNP) is calculated. Details of the change can be found in HMRC’s guidance that was updated on 16th April 2018: https://www.gov.uk/hmrc-internal-manuals/employment-income-manual 52. CNP claims with a dismissal date pre 06/04/2018 will continue to be calculated as they were previously (subject to deductions of notional tax and mitigation of new earnings and benefits). 53. CNP claims with a dismissal date of 06/04/2018 onwards will now be subject to deductions of tax and NICS, as well as mitigation new earnings and benefits. 54. An additional change to the post 06/04/2018 CNP calculation is the point at which the statutory limit of a weeks pay for S186 ERA is applied. In a pre 06/04/2018 CNP claim, the statutory weeks pay limit is applied after deducting notional tax, whereas in a post 06/04/2018 CNP claim, the statutory weeks pay limit is applied before deducting tax and NICs 55. An exemplar illustration of the difference between a pre and post 06/04/2018 CNP appears at the end of this article. Notice Worked Not Paid (NWNP) calculation 56. This is a new calculation in its own right and the calculation is not currently in the RPS case handling system (CHAMP). 57. This calculation is in respect of someone who has been given notice of dismissal by their employer, works their notice period (in whole or part), but subsequently is not paid for the period of notice worked. Similar to AP and HPT, NWNP can be calculated and paid net of Tax and NI 58. NWNP is currently assessed as Arrears of Pay, but arises from a different statutory entitlement (S184 (1)(b) ERA) and has different statutory limits (Section 86 ERA). https://www.legislation.gov.uk/ukpga/1996/18/section/184 https://www.legislation.gov.uk/ukpga/1996/18/section/86 59. Because NWNP arises from a different statutory entitlement it should be separated from AP and made a claim component in its own right. This means our NWNP calculations are in greater compliancy with the ERA. 60. NWNP will be collected from the RP1 and the RP14a. Any AP claimed for a period after the date notice was given will be processed as NWNP, not AP. Future changes to forms may look to include additional questions e.g. Period From / To and Amount. As a consequence of it being a separate calculation to AP, a period of NWNP and AP can overlap and be claimed simultaneously. For example – someone was given their notice, has worked it but not been paid for it – this is a NWNP claim. The notice weeks will be calculated according to the claimants weekly rate of pay. 61. If during the worked notice period the claimant worked overtime or earned commission / bonus in excess of their weekly pay, this can be paid as AP. 62. Any period of NWNP would reduce the period of CNP. The dates on the RP2 will be automatically amended to reduce the CNP projected notice period. 63. Any NWNP in respect of a period up to four months prior to the date of insolvency will be preferential and subject to apportionment (similar to AP, PA and HPT). This is because it is classed as remuneration for the purposes of Schedule 6 (Category 5) of the Insolvency Act 1986: https://www.legislation.gov.uk/ukpga/1986/45/schedule/6 64. As CHAMP does not calculate NWNP on its own, but as part of AP, anything we have paid here is likely to have already been claimed preferentially, so there is no impact on dividends already paid. Basic Award (BA) calculation 65. Due to a change in tax law from 6 April 2018, there is a need to change the way Basic Awards (BA) are calculated. Details of the change can be found in HMRC’s guidance which was updated on 16 April 2018:https://www.gov.uk/hmrc-internal-manuals/employment-income-manual
66. BA claims pre 06/04/2018 are not subject to tax and NIC deductions, but BA claims post 06/04/2018 will be subject to both. 67. Because the payment of BAs are in respect of a singular period in time and because of the relatively high value that can be involved, consideration has to be given to both the Lower Earning Limit (LEL) and Upper Earning Limit (UEL) when calculating NICs deductions: https://www.gov.uk/national-insurance 68. BAs are usually calculated the same as RP, but the Employment Tribunal can depart if the circumstances are right: Apportionment of Preferential Debt 69. The way that Apportionment is calculated is not changing. The changes relate only to the types of claims that are subject to Apportionment. The new calculation will automatically apportion Arrears of Pay (AP), Notice Worked Not Paid (NWNP), Holiday Pay Taken (HPT) and Protective Awards (PAs). This is in accordance with Schedule 6 (Category 5) of the Insolvency Act 1986: https://www.legislation.gov.uk/ukpga/1986/45/schedule/6 70. Only those sums paid by the RPS in respect of the period four months prior to the date of insolvency will continue to be subject to the apportionment calculation. Most PAs are for a period after insolvency, so ordinarily, will not be subject to apportionment. 71. Removing the need for manual intervention to calculate our proof of debt (POD) leads to an improved preferential / non preferential claim calculation and the quicker issuing of PODs, leading in turn to a better customer service to IP’s and their agents. This protects the NIF by recovering the correct amount of preferential debt and by looking to maximise the return to public funds. (Currently PODs require intervention to manually calculate and apportion HPT and NWNP. 72. The Apportionment calculation will also automatically consider and disapply itself from apportioning AP and HPT claims where a Regulation 8(6) Transfer of Undertakings Protection of Employment 2006 applies (Rescue Insolvency TUPE). In these circumstances, only those amounts that can be claimed from the NIF remain as a debt in the insolvency with any extra amounts above the SoS’s statutory liability becoming the responsibility of the transferee. It follows from this that in such circumstances there would be no residual balance due to the employee from the transferor. There is nothing to be apportioned against. As such the RPS would expect 100% of any preferential dividends that are payable. ANNEX A – EXAMPLE CNP CALCULATIONS Pre 06/04/2018 CNP Calculation: Number of week’s entitlement x weekly rate of pay Minus Mitigation new earning and / or benefits Minus Notional Tax (20%) = X Compare to statutory limit (number of weeks entitlement x statutory weekly limit) = Y Pay lower of X or Y = NET Payment Example: 10 weeks x £600 weekly pay = £6000 Minus Mitigation of new earning and/or benefits £1000 Minus Notional Tax 20% = £4000 (X) Compare to statutory limit (10 weeks x £508 = £5080) = Y Pay lower of X or Y = £4000 NET Payment Post April 18 Calculation: Number of week’s entitlement x weekly rate of pay Minus Mitigation of new earnings and/or benefits = X Compare to statutory limit (no of weeks entitlement x stat weekly limit) = Y Select lowest of X or Y Minus Tax (20%) and NI (12%) = NET payment Example: 10 weeks x £600 weekly pay = £6000 Minus Mitigation £1000 = £5000 (X) Compare to Statutory limit (10 weeks x £508 = £5080) = Y Select lowest of X or Y (=£5000) Minus Tax 20% and NI 12% = £3400 NET Payment General enquiries regarding this article may be sent to: [email protected] 65. Uploading RP14a forms: supplementary guidance This guidance is being issued to help correct some common issues where insolvency practitioners receive an error message when trying to upload an RP14a form. This information can also be found on Gov.uk 1. Check the upload guidance Make sure you’ve followed all the steps in the upload guidance. 2. Check the file size The file size must be less than 10MB. If your file is bigger than this, you need to separate it into smaller files so it can be uploaded. 3. Check there’s a case reference on every line A case reference must always be included. Please check there are no spaces before or after the case reference. The employer name and case reference must be entered on each line of the spreadsheet. 4. Check there’s a valid National Insurance number for all entries All entries must include a valid National Insurance number. Temporary or dummy National Insurance numbers will not be accepted and will cause the upload to fail. 5. Check there are no empty or blank rows If there are empty or blank rows at the end of the file, the upload will fail. To remove any empty records: 1. Highlight the blank row. 2. Right click. 3. Delete the row. 6. Check there are no more than 2 decimal places in each cell No cell can have a numerical value with more than 2 decimal places. You might need to select each cell individually to make sure figures do not have more than 2 decimal places, as it’s not always visible.
This includes the following fields:
7. Check all numerical fields contain numbers only Only numbers can be put in the numerical fields. If you include any special characters, like £, or any text, the upload will fail. 8. Check date fields are formatted correctly Date fields should be formatted as DD/MM/YYYY. If you do not know the date and the field is not mandatory, it should be left blank. 9. Check drop down boxes have not been overtyped When entering data into a cell with a drop down box, only select one of the options provided. If you type over the options, the upload will fail. 10. Check no data is entered after the smart tag Do not enter any data after the blue smart tag on the spreadsheet as this will not be uploaded and will be lost. If you follow this guidance and your document will still not upload, please contact the Insolvency Practitioner Helpdesk
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