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What Happens To My Employees In A Liquidation

What happens to my employees in a liquidation? Written by John A Waller, Director. Reviewed December 3rd,2022.

The outcome of your employees depends on the specific type of insolvent procedure you choose in insolvency arrangements where the business is allowed to carry on trading, like administration. Your staff may continue to work for you. Redundancies may need to be carried out. Read further: Employee Guide to Insolvency.

Your employer is considered insolvent if it cannot pay the company’s debts as and when they fall due or if its liabilities exceed its assets. For further reading about your employees. Please read, can’t pay employees anymore.

Once the directors accept the company’s insolvent position, they will then:

  • Make you redundant immediately;
  • Retain your services while dealing with matters;
  • Transfer you to a new employer.

Limited companies in the United Kingdom have different types of insolvency options to consider. Mainly dependent on the viability of the future of the business.

For potentially viable businesses:

Business closure:

Personal Insolvency;

Subject to the action taken by the directors. Employees of the company may apply for support from the government for unpaid:

  • A redundancy payment;
  • Holiday pay;
  • Outstanding payments like:
    • Unpaid wages;
    • Overtime;
    • Commission.
  • Statutory notice pay.

The company ceases trading, what then?

If your company discontinues trading, your employees will be made redundant and can claim via the Insolvency Practitioners for owed wages plus annual leave not taken. On top of this, employees are eligible for redundancy pay equal to one week for each year they have worked for the business, provided the company has employed them for 12 months. Redundancy pay remains capped currently at £479 per week (November 29th, 2020).

Former company directors can claim wages owed, holiday pay, and unpaid redundancy.

Will my employees receive any payout if there is no money in the company?

However, if the company is insolvent? When the company can’t afford to pay employees monies owed? Even after assets have been realised. Employee salaries, wages and holiday pay remain ranked as “preferential debts” and remain payable before other obligations are granted.

Therefore, having insufficient monies to pay what remains owed to staff means the National Insurance Fund will pay the redundancy pay and portion of the wages owed.

Please contact HBG Advisory (Licensed Insolvency Practitioners) for  employee rights when a company is insolvent:

  • Book a virtual meeting safe and private;
  • Use Web Chat at the bottom right of the web page.

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