Employees Entitlements in a liquidation

It is possible for a company to arrange for the Department of Social Protection to directly pay employees their redundancy monies. For further information click on the following link:

The processing of employees claims in Liquidations and Receiverships is an important task.

In many cases employee claims will form the largest category of Preferential Creditor.

The relevant legislation provides that an employee with 104 weeks continuous service with the same employer, aged between 16 and 66, and employees who have reached 66 years of age and whose date of termination is on or after 8th May 2007 are now eligible, and whose employment was terminated because of redundancy may be entitled to a redundancy lump sum payment.

Where a notice of redundancy has been formally conveyed to the employee on or after 10 April 2005 by reason of the employee receiving a notice of redundancy in the prescribed form i.e. the RP50 Form, the employee is entitled to receive two weeks’ pay for each year of service, regardless of age.

The redundancy lump sum payment is calculated as two weeks’ pay for each year of employment plus a bonus week. This is a tax free lump sum. When processed, the Department pays the employee directly. It is not necessary for the company to have entered a formal insolvency process for redundancy claims to be processed.

It should be noted that there is a statutory ceiling of €600 per week applied when calculating the lump sum.

There is a useful redundancy calculator on the Department’s web site at:

https://www.mywelfare.ie/redundancycalculator#calcPanel

The relevant legislation provides that an employee who has continuous employment with the same employer for a minimum period of 13 weeks is entitled to a minimum period of notice before his dismissal. The amount of notice entitlement depends on the length of service. The amount of notice entitlement is set out below:
Length of Service Minimum Notice

Thirteen weeks to two years One week
Two years to five years Two weeks
Five years to ten years Four weeks
Ten years to fifteen years Six weeks
More than fifteen years Eight weeks

If an employee does not receive the statutory minimum notice period , then the employee may be entitled to receive a payment from the Department of Social Protection. This is a tax free lump sum. When processed, the Insolvency Practitioner pays the employee directly.

The relevant legislation provides that an employee who is in employment which is insurable for all benefits under the Social Welfare Acts (in general terms this means employees who pay full PRSI contributions) is entitled to receive payment for arrears of wages and holiday pay from the Department of Social Protection. This is subject to PAYE/PRSI and universal social charge.

Some limitations and conditions apply to payments made under the Scheme. All entitlements based on pay are limited to a maximum weekly rate which is revised periodically. The current limit is €600 per week. There is also a limit of eight weeks for arrears of pay, sick pay, holiday pay and pay in lieu of statutory notice. In most cases, the Scheme covers entitlements relating to the period of eighteen months prior to the date of the insolvency of the employer or the termination of employment. In the case of an award made to an employee – for example, an unfair dismissal award – the eighteen-month period applies to the date of the award. An award may also have a date that is later than the date of insolvency.

How is pay calculated?

(i) In the case of an employee who is paid wholly or partly by piece rates, bonuses or commissions (being piece rates, bonuses or commissions related directly to his output) and in the case of any other employee whose remuneration varies in relation to the amount of work done by him, his normal weekly remuneration shall be taken to be the amount as calculated in accordance with subparagraph (ii) below:

(ii) Normal weekly remuneration shall be calculated by dividing the remuneration to be taken into account in accordance with subparagraph (iii) by the number of hours ascertained in accordance with subparagraph (vi) and multiplying the resulting hourly rate by the normal weekly working hours of the employee concerned at the date on which he was declared redundant.

(iii) The remuneration to be taken into account for the purposes of subparagraph (ii) shall be the total remuneration paid to the employee concerned for all the hours worked in the period of 26 weeks which ended 13 weeks before the date on which the employee was declared redundant, adjusted in respect of any variations in the rates of pay which became operative during the period of 13 weeks ending on the date on which the employee was declared redundant.

When processed, the Insolvency Practitioner pays the employee directly.

The appropriate forms should be completed and returned to the company’s Insolvency Practitioner.

The Insolvency Practitioner will process the forms and forward them to the Department of Social Protection.

We provide a service of attending creditors’ meetings convened pursuant to Section 587 of the Companies Act 2014 (which is a meeting convened to allow, inter alia, creditors to appoint their own choice of liquidator).  One of our purposes in attending is to ensure that employees’ claims are properly recorded.  At the time of updating this article, March 2023,   most creditors meetings are held virtually. We are happy to attend such virtual meetings    and ask questions on behalf of employees. (The reason we provide such a service is because it provides us an opportunity to be appointed as liquidator.) We do not charge for attending creditors meetings.

When we are appointed as Liquidators or Receivers we prioritise the processing of employees claims.

For further information please contact Jim Stafford, Tom Murray, Andrew Hendrick or Anthony Glennon on 01 661 4066 or jim.stafford@frielstafford.ie tom.murray@frielstafford.ie  andrew.hendrick@frielstafford.ie or anthony.glennon@frielstafford.ie