Company insolvency ‘main reason for tribunal non-payment’

Published on November 8, 2013 by Crawfords Accounting

Company insolvency has been revealed as the main reason why employment tribunal awards go unpaid – particularly those for larger amounts.

A report from the Department for Business Innovation and Skills, conducted by IFF Research, shows 37% of instances of non-payment were because the company owing the money had ceased trading or had become insolvent.

This outranked refusal to pay by the employer (29%) and ‘runaway’ employers who could not be located (17%).

In particular, company insolvency is associated with non-payment of larger amounts, accounting for 46% of sums over £5,000 but just 35% of those valued at less than £5,000.

However, corporate insolvency in itself does not necessarily mean that tribunal awards go unpaid, as the BIS points out.

In the event of corporate insolvency, there exists a Redundancy Payments Service, with the role of paying out certain elements of the employment tribunal award – meaning the failure of a company does not need to have an adverse effect on vulnerable former employees.

But to avoid falling foul of a government that says it is “looking at what action it can take to make sure people get their employment tribunal award when a company has stopped trading”, directors may wish to make sure they seek expert insolvency advice, and are not perceived as ‘rogues’ further down the line.

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