The National Insurance Fund (NIF) guarantees a basic minimum payment of specific debts owed to employees by their insolvent employers, provided certain conditions are met. (Anything not covered by NIF must be claimed in the insolvency and therefore only a small percentage is likely to be recovered, if anything.) The maximum limits on debts in relation to arrears of pay, statutory notice pay, holiday pay, basic awards and statutory redundancy payments are set out below.
Arrears of pay
Employees can claim up to a maximum limit of eight weeks' arrears of pay from the National Insurance Fund (section 184(1)(a), Employment Rights Act 1996). This is capped at the statutory limit on a week's pay (section 186, ERA 1996: see Week's pay), and is then subject to tax and NICs.
Arrears of pay is not limited to unpaid wages. It also includes:
Statutory guarantee payments.
Payment for time off work under Part VI of ERA 1996 (sections 50 to 63C) or time off for union duties and activities under section 169 of TULRCA.
Remuneration on suspension on medical or maternity grounds under sections 64 and 68 of ERA 1996.
Remuneration under a protective award under section 189 of TULRCA.
(Section 184(2), ERA 1996.)
If more than one of the above types of payment are claimed the cap applies to the aggregated sum. For example, if the employee is owed six weeks' wages plus a protective award of 90 days' pay, the NIF will only cover a total of eight weeks' pay capped at the statutory rate.
Statutory notice pay
An employee can recover a debt in relation to statutory notice pay (irrespective of the length of their contractual notice) from the National Insurance Fund (section 184(1)(b), Employment Rights Act 1996). The maximum statutory minimum notice period is 12 weeks and is subject to the current maximum statutory limit on a week's pay (see Week's pay).
An employee can recover a debt in relation to holiday pay from the National Insurance Fund, subject to a maximum of six weeks' pay (section 184(1)(c), Employment Rights Act 1996). One week's pay is subject to the current maximum statutory limit on a week's pay (see Week's pay).
Basic award or statutory redundancy pay
An employee can recover a debt in relation to a basic award (section 184(1)(d), Employment Rights Act 1996), subject to the current maximum limit on the basic award (see Basic award).
Where the whole or part of a statutory redundancy payment remains unpaid, the employee can claim the outstanding payment from the National Insurance Fund (section 166(1), Employment Rights Act 1996). The amount of the payment will be subject to the current limit on statutory redundancy payments (see Statutory redundancy payment). For more information, see Practice note, Redundancy (4): statutory redundancy payments: National Insurance Fund: employers who are insolvent or refuse to pay.