Employee Entitlements in Insolvency

When a company becomes insolvent, employees are often among those most severely affected. In addition to losing their employment, employees may be owed wages, holiday pay, notice pay, redundancy payments and other contractual entitlements.

Irish legislation provides important protections for employees where an employer enters liquidation, receivership or certain other insolvency procedures. These protections include statutory preferential claims against the employer's assets and the provision of State-funded schemes where the employer is unable to meet its obligations.

Statutory Redundancy Payments

·        Employees who lose their jobs because of redundancy may qualify for a statutory redundancy payment under the Redundancy Payments Acts 1967–2014.

·        Generally, an employee must have at least two years' continuous reckonable service and satisfy the other statutory conditions.

The statutory entitlement is calculated as follows:

·        Two weeks' pay for each year of reckonable service.

·        An additional week's pay.

·        Weekly earnings are capped at €600 for this purpose.

For example, an employee with ten years' reckonable service and weekly earnings of €600 or more would ordinarily qualify for a statutory redundancy payment of €12,600.

In Insolvency, the office of the Liquidator / Receiver will process the statutory claim on behalf of the employees with the Department of Social Protection. The Social Insurance Fund covers the respective redundancy claims and the Department in turn becomes the creditor of the company.

Outstanding Wages, Holiday Pay and Other Entitlements

Employees may also be owed outstanding wages, accrued holiday pay, sick pay, minimum notice entitlements and certain other employment-related amounts.

The Insolvency Payments Scheme, established under the Protection of Employees (Employers' Insolvency) Acts 1984–2024, provides for payment of certain outstanding employee entitlements where the employer is legally insolvent and the relevant statutory conditions are satisfied.

The following types of claims are covered under the Scheme:

• Arrears of wages

• Outstanding holiday pay

• Unpaid statutory minimum notice

• Contractual sick pay

• Most unpaid statutory awards made by the Workplace Relations Commission (WRC) or Labour Court (such as Unfair Dismissal)

• Certain arrears of pension contributions

Some limitations and conditions apply:

• There is an 8 week limit to claims in respect of arrears of wages, holiday pay, contractual sick pay, and statutory minimum notice

• The gross weekly wage in the claim is capped at €600 per week

NOTE: Arrears of wages and holiday pay are taxed in the year (of payment) in accordance with individual employee tax bands and tax credits (employees can reclaim any overpayments of tax in accordance with their individual tax bands and tax credits in the yearly balancing statement requests).

Statutory minimum notice under the Minimum Notice And Terms of Employment Act 1973 is a statutory entitlement which is not subject to tax. The amount of notice you are entitled to by law depends on how long you have been working for your employer.

Minimum Notice calculations:

Length of service	Minimum notice
13 weeks to 2 years	1 week
2 years to 5 years	2 weeks
5 years to 10 years	4 weeks
10 years to 15 years	6 weeks
15 years or more	8 weeks

For example, if you have worked for your employer for 5 years and 3 months you get 4 weeks' notice.

Pension contributions

Certain employee and employer contributions to pension schemes are covered under the Insolvency Payments Scheme.

Pensions schemes covered include Occupational pension schemes, PRSAs and My Future Fund (auto-enrolment).

Employee contributions are only covered if they were deducted from the employee’s pay but not paid into the pension scheme.

Pension contributions that were liable to be paid in the 12 months up to the date of the employer’s insolvency are covered.

Preferential Status of Employee Claims

Under section 621 of the Companies Act 2014, certain employee claims enjoy preferential status in a company liquidation.

These include qualifying wages and salary arrears, accrued holiday remuneration and certain other employment-related liabilities, subject to statutory conditions and limits.

Preferential status means that qualifying claims are paid ahead of ordinary unsecured creditors. However, this does not guarantee full payment, particularly where the company's assets are insufficient or subject to secured creditors' rights.

Where the State pays employee entitlements under the statutory schemes, it may acquire rights to recover the relevant amounts from the insolvent employer company and becomes a preferential creditor of the company.

Under the Insolvency Payments Scheme, qualifying arrears of wages, holiday pay, contractual sick pay and statutory minimum notice are generally limited to eight weeks, subject to a maximum gross weekly remuneration of €600.

Important Legislative Development in 2026

A significant development occurred on 8 June 2026 with the introduction of the Deemed Insolvent Process, under the Protection of Employees (Employers' Insolvency) (Amendment) Act 2026.

Previously, employees could face difficulties accessing the Insolvency Payments Scheme where their employer simply ceased trading without entering a formal insolvency procedure.

The new process provides a route for eligible employees to claim outstanding entitlements where the employer has ceased trading but has not entered liquidation, receivership or bankruptcy. Specific eligibility conditions apply, including requirements concerning the date the debts arose and attempts to obtain payment from the employer.

This is an important extension of employee protection, particularly for employees of smaller businesses that cease trading without appointing a liquidator.

The Role of the Liquidator

In a creditors' voluntary liquidation or compulsory liquidation, the liquidator’s office plays an important role as the Employer representative in assisting employees to recover their statutory entitlements.

This typically involves identifying outstanding employee liabilities, verifying employment records, calculating redundancy and other statutory entitlements, and submitting the appropriate applications on the prescribed forms submitted to to the online portal of the Department of Social Protection.

The liquidator will also take account of the preferential status of the Department claim when distributing available assets to creditors.

Conclusion

Although corporate insolvency can have serious financial consequences for employees, Irish legislation provides a framework of statutory protections.

The combination of statutory redundancy payments, the Insolvency Payments Scheme and preferential creditor status can significantly reduce the financial impact on employees.

The introduction of the Deemed Insolvent Process in June 2026 represents a further strengthening of these protections.

For directors of insolvent companies and their employees, it is important to have good communication with the liquidator's office to process early and quickly the employee claims through the Department of Social Protection to ensure the statutory rights and pay of the employees is protected.

This article is of a general nature only covering employee claims in Insolvency. For professional advice in relation to your company in insolvency and employee statutory entitlements, please contact the restructuring team at McCarthy Walsh.