When your employer cannot pay redundancy: the Social Insurance Fund and the Insolvency Payments Scheme

A redundancy is hard enough when the employer can pay. When the business has collapsed, the question becomes who pays, how, and when. The answer is the State, through two separate routes: the Social Insurance Fund for your statutory redundancy lump sum, and the Insolvency Payments Scheme for the wages, holiday pay, notice and pension contributions you are owed. Both are run by the Department of Social Protection and both depend on the employer being insolvent in the legal sense. This guide covers each route, the limits, the liquidator's role and the timescales.

Two routes, one fund

The statutory redundancy sum. Under the Redundancy Payments Acts 1967 to 2014 the employer pays your lump sum. Where the employer is insolvent and cannot, the Department pays it from the Social Insurance Fund on the employer's or the liquidator's application, and the Department becomes a creditor of the employer for the amount.

Everything else. The Insolvency Payments Scheme, under the Protection of Employees (Employers' Insolvency) Acts, covers arrears of wages, holiday pay, sick pay under the employer's scheme, minimum notice, certain unpaid pension contributions, and amounts awarded to you by the WRC or a court that the employer did not pay before it failed. The insolvency practitioner applies on your behalf.

Both come from the same Social Insurance Fund and both go through the Department, but they are different applications with different limits.

What "insolvent" means here

The schemes apply where the employer is insolvent in a formal sense: a company in liquidation or receivership, a company in examinership in some circumstances, a bankrupt sole trader, or an employer who has died and whose estate is being administered insolvent. The Department's page lists the recognised situations.

An employer that is struggling, has stopped paying, or has simply closed the doors without appointing anyone is not yet "insolvent" for the schemes. That gap catches many people. Where no liquidator has been appointed, the Department can in some cases accept an application for the redundancy sum where the employer confirms in writing that it cannot pay, and employees can in the last resort petition to have a company wound up so that a liquidator is appointed. A union or a solicitor can tell you whether that is realistic for your employer.

If the employer is trading and able to pay but refuses, the schemes do not apply. The route is a WRC complaint under the Redundancy Payments Acts or the Payment of Wages Act, and the how to make a WRC complaint guide takes you through it.

The statutory sum from the Social Insurance Fund

The Department pays the same sum your employer would have owed:

• two weeks' pay for every year of continuous service, with part years as days over 365;
• plus one bonus week;
• weekly pay capped at €600;
• free of income tax, USC and PRSI;
• provided you have at least 104 weeks' continuous service.

Someone with 9 years' service on €700 a week is owed 19 weeks × €600 = €11,400. The calculator explainer sets out the counting and the redundancy calculator does the arithmetic, so you can check the figure the liquidator submits.

The process:

1. The employer or the liquidator applies online through the Department's redundancy and insolvency system. The old RP50 paper form is gone.
2. You receive a notice to confirm the details submitted: your dates, your weekly pay, and your PPS number. Check them carefully, because an error in the start date or the pay figure comes straight off your sum.
3. The Department pays you directly into your bank account, in a single payment.

You do not pay anything, and there is no fee. If the liquidator has not applied and you cannot reach them, the Department's redundancy section can tell you whether an application has been received.

The Insolvency Payments Scheme for wages, holidays, notice and pension

The scheme covers what the employer owed you when it failed, within limits set by the regulations. The Department's published limits, which could not be verified against the regulations for this guide and should be checked on its page, are broadly:

In all cases weekly pay is capped at €600, and the arrears must fall within a defined period, generally the 18 months before the date of insolvency.

What is not covered: pay above the cap, ex gratia or contractual redundancy above the statutory sum, bonuses and commission outside the arrears period, and anything the employer promised in a settlement that was not a WRC or court award. Those remain claims against the company in the liquidation, where employees rank as preferential creditors for some items but often recover little.

The process mirrors the redundancy one: the insolvency practitioner prepares the claim from the company's records, you confirm the details, and the Department pays. If the company's records are poor, your own payslips, contract and bank statements fill the gap, so gather them now.

The liquidator's role

Once appointed, the liquidator (or receiver, or examiner) is the person who deals with employees' claims. They should:

• write to you confirming your employment has ended and the date;
• apply to the Department for your statutory redundancy sum;
• prepare and submit your Insolvency Payments Scheme claim;
• give you an employment detail summary position, or confirm that Revenue has been updated;
• tell you how to lodge any other claim in the liquidation.

The liquidator acts for the company's creditors as a whole, not for you personally, and will not give you advice. If the liquidator is slow, write and ask for a timeline; if you hear nothing, the Department's insolvency section can confirm whether a claim has been lodged.

Minimum notice is a particular point. If the business closed without notice, you are owed your statutory minimum notice pay (one to eight weeks by service) and the scheme covers it. The liquidator should claim it with your other arrears. The redundancy notice periods guide has the bands.

Timescales

The Department does not publish a target time for either payment. What drives the time is:

• how quickly a liquidator is appointed (the formal insolvency has to exist before either scheme can pay);
• how quickly the liquidator files;
• whether the company's records support the figures;
• whether you confirmed your details promptly.

Where everything is in order, weeks. Where a company has closed informally and no one has been appointed, months, and sometimes longer. In the meantime, claim Jobseeker's Benefit or Allowance: a pending redundancy payment does not stop you claiming, and Jobseeker's Benefit is not means tested so the eventual lump sum will not reduce it. The lead guide has the social welfare section.

Can redundancy be paid in instalments?

The Acts entitle you to the lump sum on your termination date, in one payment. An employer that is still trading has no right to spread it without your agreement. Employers in difficulty do sometimes ask, and some employees agree to staged payments to keep a struggling business going, but the risk is yours: if the employer fails before the balance is paid, the unpaid part becomes a claim in the insolvency, and while the Department will pay the statutory sum it had not paid, the process starts from scratch.

If you are asked to accept instalments:

• get the schedule in writing, with dates and amounts;
• ask that the agreement states the full statutory sum is still owed and that the instalments are payment towards it;
• do not sign anything that waives your right to the balance or to claim it from the Social Insurance Fund if the employer fails.

Where the employer is already insolvent, the question does not arise: the Department pays the statutory sum in full.

A short checklist

• Confirm whether a liquidator, receiver or examiner has been appointed, and get their name and contact details.
• Gather your contract or statement of terms, payslips for the last year, your bank statements showing pay, and any written notice of redundancy.
• Work out your own statutory sum and your notice entitlement so you can check the application.
• Confirm the Department's notice promptly when it arrives.
• Claim a jobseeker's payment now rather than waiting for the lump sum.
• Note the 6-month WRC clock in case the employer turns out not to be insolvent and simply is not paying.

Where this leaves you

The redundancy calculator gives you the statutory sum the Department should pay, from your start date, end date and normal weekly pay, with the €600 cap applied and the notice you are owed alongside, so you can check the liquidator's application before you confirm it. If no insolvency practitioner has been appointed and the employer has simply stopped paying, the route is less clear and a union official or a solicitor can tell you whether a WRC complaint or a petition is the better step; the enquiry page explains how that works on this site.