If your employer becomes insolvent, your accrued annual leave does not vanish. You can claim unpaid holiday pay from the government’s Redundancy Payments Service, which covers up to 6 weeks of holiday, subject to a statutory weekly cap of £751 as of 6 April 2026.
What you will not necessarily recover is everything you were owed. The caps bite, contractual extras are treated differently from statutory entitlement, and the balance becomes a claim in the insolvency itself — which may pay little or nothing. This post sets out exactly where the line falls.
Key Takeaways
- The National Insurance Fund, administered by the Redundancy Payments Service, pays out when an employer cannot.
- Holiday pay is capped at 6 weeks; arrears of pay at 8 weeks; statutory notice pay at up to 12 weeks — GOV.UK.
- All of it is subject to a £751 weekly maximum (£719 for dismissals before 6 April 2026).
- Anything above the caps becomes a creditor claim against the insolvent business, with no guarantee of payment.
What “Insolvent” Means Here
The statutory scheme is triggered by a formal insolvency event, not by an employer simply running out of money. That includes liquidation, administration, receivership, a company voluntary arrangement, or bankruptcy where the employer is an individual.
An insolvency practitioner is appointed and issues you a case reference number (a “CN” number). You need it to claim. If your employer has closed the doors without any formal insolvency process, the scheme does not open and your route is an employment tribunal claim instead — a materially harder path.
What You Can Claim from the Redundancy Payments Service
Five separate heads of claim, each with its own limit:
| What you can claim | Limit |
|---|---|
| Holiday pay (accrued and untaken) | Up to 6 weeks |
| Arrears of pay (wages, overtime, commission) | Up to 8 weeks |
| Statutory notice pay | 1 week per year of service, up to 12 weeks |
| Statutory redundancy pay | Up to 20 years’ service, age-banded |
| Unpaid pension contributions | Certain contributions, claimed by the pension trustee |
Every one of these is measured against a weekly pay cap of £751. If you earned £1,100 a week, the scheme values each of your weeks at £751 for calculation purposes.
Statutory redundancy pay is banded by age: half a week’s pay for each full year worked under 22, one week per year between 22 and 40, and one and a half weeks per year at 41 or older, capped at 20 years of service.
Worked Example: What Actually Gets Recovered
Miriam earned £1,000 a week, had 9 years’ service, and was owed 7.5 weeks of accrued annual leave when her employer went into administration in June 2026.
Her holiday pay claim:
- Weeks owed: 7.5
- Weeks the scheme will pay: 6 (the statutory maximum)
- Weekly value used: £751 (not her actual £1,000)
- Payment: 6 × £751 = £4,506
What she was actually owed: 7.5 × £1,000 = £7,500.
The shortfall: £2,994. That amount does not disappear as a debt — Miriam can submit it as a claim to the insolvency practitioner alongside other creditors. Whether she sees any of it depends entirely on what is left in the estate after secured creditors are paid, and in many administrations the answer is very little.
Add her notice pay (9 weeks at £751 = £6,759) and statutory redundancy pay, and the RPS route recovers the bulk of her loss. But the gap between “what I was owed” and “what the fund pays” is real, and it is widest for high earners and for anyone carrying a large untaken leave balance.
Where the Caps Hurt Most
Three groups lose most:
- High earners. Anyone earning above £751 a week is capped on every head of claim simultaneously.
- Anyone hoarding leave. A 7.5-week balance loses 1.5 weeks outright to the 6-week ceiling. A worker who took their leave through the year loses nothing to that cap.
- Staff on generous contractual leave. The scheme is built around statutory minimums. Contractual holiday above 5.6 weeks is still claimable within the 6-week limit, but it is competing for the same capped space.
This is the practical argument for not building up a large leave balance, and it is separate from the wellbeing argument. Our guide to carrying over annual leave in the UK covers the rules on what can legitimately roll into the next year.
How to Claim, Step by Step
- Get the CN reference from the insolvency practitioner. They should write to you; if they do not, contact them directly.
- Wait for your LN number for notice pay. This is issued after the date your notice period would have ended — usually no more than 12 weeks after dismissal.
- Apply online through the GOV.UK redundancy claim service. You will need your National Insurance number, bank details, employment dates, and pay information.
- Apply within 6 months of dismissal for redundancy pay. Late claims can be refused.
- Submit the balance to the insolvency practitioner as a creditor claim, separately from the RPS application. These are two different processes and doing one does not do the other.
Payments are made after tax and National Insurance are deducted, so budget for the net figure rather than the gross.
What Happens If the Business Is Sold Instead
Insolvency and sale are different outcomes with very different consequences for your leave.
If the business or part of it is transferred to a new owner as a going concern, TUPE may apply — in which case your employment continues, your accrued annual leave transfers with you, and there is nothing to claim from the RPS because nothing has been lost. Our guide to annual leave and TUPE transfers covers how the balance carries across.
Insolvency modifies how TUPE operates in some cases, which is why administrations sometimes produce a mixed outcome: some staff transfer to a buyer, others are dismissed and claim from the fund. Check which group you are in before assuming your leave is lost.
What This Means for You
If you are an employee facing this:
- Download your leave records now, before system access is switched off. Screenshots of your balance, your contract, and your last six payslips are the evidence base for your claim.
- Do not wait for someone to invite you to claim. Get the CN number and apply.
- Claim the shortfall from the practitioner too, even if recovery looks unlikely. It costs you a form.
If you run an SMB and want to reduce this risk for your team: keep leave balances accurate and visible, and discourage large untaken balances. A workforce averaging two weeks of accrued leave is far better protected in an insolvency than one averaging seven, and the difference is entirely a management choice. Our guide to annual leave and redundancy in the UK covers the solvent-employer version of the same calculation.
Leave Balance gives every employee a live, exportable record of their accrued balance and every approved absence — the exact documentation an RPS claim needs, available without asking HR. Flat $10/month, unlimited employees, 14-day free trial.
This article is general information about UK insolvency and employment law, not legal advice. Figures are correct as at July 2026. Take advice on your own circumstances.
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