Employees’ Rights in case of their Employers’ Insolvency

Insolvency is where your employer cannot pay persons to whom money is owed, such as employees' wages. When your employer becomes insolvent, you may want to know how to recover your wages, wages in lieu of notice, severance payment,  accrued holiday remuneration or other sums owed by your employer. You can learn about your rights and protection under the law here.

When Your Employer is in Bankruptcy, Winding-up or Receivership

You are entitled to payment out of the assets of the employer in preference to most creditors in respect of wages, wages in lieu of notice, severance payment and accrued holiday remuneration under certain conditions. To see if you are qualified for preferential payment, click on the link below.

A Guide on Employee’s Rights in Bankruptcy, Winding-up and Receivership (pdf file)

Actions to take

You should not rely on mere promises by the employer or some third party to pay your arrears of wages and delay taking legal action. This is what you can do.

Seek assistance from the Labour Department (LD) promptly

In the event that your employer has become insolvent, you should seek assistance from the Labour Relations Division of LD as soon as possible.

In order to recover arrears of wages, pay for untaken annual leave and untaken statutory holidays, wages in lieu of notice, severance payment or other sums owed, you may need to present a bankruptcy or winding-up petition against your insolvent employer. You may also apply for ex gratia payment from the Protection of Wages on Insolvency Fund in respect of arrears of wages, pay for untaken annual leave and untaken statutory holidays, wages in lieu of notice or severance payment owed by your insolvent employer. LD will refer appropriate cases to the Legal Aid Department (LAD) so that prompt legal proceedings can be commenced to protect your interest.

Contact information of Offices of the Labour Relations Division

Seek Legal Aid

LD may refer you to LAD to commence bankruptcy or winding-up petitions against your insolvent employer. To successfully apply for legal aid, you will need to satisfy the means and merits tests. You will be eligible on means if your financial resources do not exceed the financial eligibility limit. For merits, you will need to show that there are reasonable grounds for taking legal action.

If legal aid is granted, you will be legally represented for the purpose of issuing a bankruptcy or winding-up petition against your insolvent employer. Once a bankruptcy or winding-up petition against your insolvent employer is made, you should file your proof of debt with the Official Receiver’s Office for the sums owed to you by your employer as soon as possible.

More on getting legal assistance

Apply for Ex Gratia Payment

The Protection of Wages on Insolvency Fund provides timely relief in the form of ex gratia payment to employees of insolvent employers. The Fund enables them to obtain, without having to wait until the completion of the insolvency procedures, payment of wages, pay for untaken annual leave and untaken statutory holidays, wages in lieu of notice or severance payment owed to them.

Please note that an application for ex gratia payment from the Fund in respect of wages and pay for untaken statutory holidays shall be made within 6 months after the employee’s last day of service, whereas an application for ex gratia payment from the Fund in respect of pay for untaken annual leave,  wages in lieu of notice and severance payment shall be made within 6 months after the date of termination of contract.

More on the Protection of Wages on Insolvency Fund (pdf file)
Last revision date: September 2013