Are Employees able to Receive Maternity pay from HMRC when a Company is Insolvent?

After a company has been declared formally insolvent, HMRC will continue to pay statutory maternity pay (SMP) for the full legal term. They will not do so, however, until the week of the insolvency itself, so all payments before this date should come from the employer. This legislation is covered in The Employment Rights Act 1996 and Insolvency Act 1986.

If the company enters into an insolvent liquidation, the employees become preferential creditors, and it is the liquidator who will manage the employee claims.  

If you are working for a company that becomes insolvent, the best advice would be to phone the Statutory Payments Dispute Team on 0191 225 5221.

Getting paid Statutory Maternity Pay During the Period Before a Company has been Formally Declared Insolvent

In certain situations, companies approaching insolvency do not have the funds to pay their employees but have yet to be wound up. In this scenario, an individual on statutory maternity leave could not depend upon HMRC for the payments since the company is not yet officially insolvent. Women in this situation would become ‘preferred creditors’ and, as soon as the company enters insolvency, should request a claim form from the appointed insolvency practitioner. If the company assets are not sufficient to remunerate preferred creditors, this class of creditors have a right to be paid from the National Insurance fund.

Remuneration for Suspension on Maternity Grounds

Where someone’s role was suspended on maternity grounds, separate rules apply. As per The Employment rights act 1996, Secretary of State must pay employees whose employer has become insolvent up to £479 a week for a maximum of eight weeks.

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