Unpaid wage claim reaches record high!

Research has found that unpaid wage claims in the UK reached an eight-year high in 2025–26, driven by rising business insolvencies and financial distress across multiple industries.

It has been reported through a Freedom of Information request:

workers received a record £57m in unpaid wages during 2025–26;
pension entitlement payments also hit an eight-year high of £29m; and
the Insolvency Service paid out a total of £472m to employees of insolvent businesses, up from £465m the previous year.

The largest share of payments related to redundancy compensation, totalling £242m.

Under UK insolvency rules:

employees can claim up to eight weeks of unpaid wages through the Redundancy Payments Office;
payments are capped at £751 per week; and
statutory redundancy pay is capped at £22,530.

Increasing insolvencies are leading to more situations where employers cannot afford to pay wages or redundancy entitlements, exposing businesses to breach of contract and employment tribunal claims.

It has been claimed that businesses are running out of money before formally becoming insolvent, causing delayed payroll; missed pension contributions; and mounting wage arrears before collapse. The survey identified that sectors included hospitality, retail, construction and tech are under sustained pressure due to inflation; higher borrowing costs; energy prices; reduced consumer spending; and increased employment costs such as national insurance contributions.

Financially distressed employers often bypass proper HR and redundancy procedures in attempts to cut costs quickly, increasing legal risks and tribunal exposure. Employees are becoming more aware of their rights and more willing to pursue unpaid wages through legal channels when employers fail.

The key points that employers should adhere to are to keep employees informed during restructuring or insolvency risks; explain redundancy processes and available financial support clearly; offer career transition support where possible; and maintain visible leadership and transparent communication to preserve trust and employee wellbeing during difficult periods.

Should you wish to discuss redundancy process please call to speak to one of our CIPD accredited consultants on 0800 9995 121.

Unpaid wage claim reaches record high!

121 HR Solutions Ltd