What happens if an employer becomes insolvent?

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NOTE: The Insolvency Experts offer financial guidance and representation to companies who are considering or currently going through the Winding Up process. If you are an employee of such a company looking for advice on unpaid wages, you can find this from the UK government by clicking here.

If you are an employee of an insolvent company it is likely that your employer will have engaged an insolvency professional who should contact all employees to explain your employment rights. There are two main likely outcomes of a formal insolvency process for employees.

Business administration proceedings

If the company is placed into Administration and a sale of the business is affected then it is likely that your contract of employment will be transferred over as part of the sale. A sale of the business in Administration will usually invoke the Transfer of Undertakings and Protection of Earnings Regulations (TUPE) meaning that upon transfer of your employment all of your historic rights including the length of service will transfer as well. Find out more about your company in administration. If a sale of the business is not completed and it is necessary to make redundancies either in an Administration or Liquidation scenario then the Redundancy Payments Office (RPO) will be notified by the Insolvency Practitioner.

RPO payments

The RPO is a government body that will make payments out of the National Insurance Fund to employees of insolvent companies for redundancy, arrears of pay, holiday pay and payment in lieu of notice when the employers are unable to make these payments. The amount paid is fixed at a statutory weekly maximum of £479 and is usually received within 3-5 weeks of the appointment. The Insolvency Practitioner acting for the company should explain to the employees how to make the claim and assist them throughout the process. It is also important for employees to understand what will happen to their livelihoods during company liquidation, whether or not it is a voluntary or compulsory liquidation. Learn about company liquidation process.

Speak to The Insolvency Experts

For more information on the liquidation, debt and insolvency advice that we provide, please get in touch. Contact The Insolvency Experts online or speak to one of our experienced Insolvency Practitioners directly by calling us on 0300 303 8284.