Holiday pay when company in administration: ask the expert

I added some of my accrued holiday to the end of my maternity leave, but my company has gone into liquidation and the administrators in my case have said that this is classed as wages and not accrued holiday, meaning that I only get paid up to a cap by way of a preferential payment. Is there any case law that says that it can be classed as holiday pay and therefore not subject to the cap?

Where an employee is owed money from a company in liquidation, the debts are usually unsecured and are second to last in the order of priority for payment. However, under s.386 and Category 5, Schedule 6 of the Insolvency Act 1986, employees are owed their “remuneration” as a preferential debt. This means that remuneration is paid second after fixed charges (such as mortgages). Preferential debts include:

·         – Remuneration owed for the four month period before the start of the relevant insolvency proceedings, subject to a maximum overall claim of £800. This includes, for example your salary and SMP.

·         – Accrued holiday pay in respect of any period prior to the start of proceedings. This is not subject to the £800 cap. Please note that holiday accrued after the start of the insolvency proceedings does not fall under this section. You therefore need to check when the insolvency proceedings started.

You should refer the administrator to the Insolvency Act 1986 in respect of your accrued holiday and ask for it to be paid uncapped.

Sarah Calderwood assisted with this answer.

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