Redundancy payments and insolvency

The appointment of insolvency administrators is an extremely worrying time for employees, especially during an economic crisis. However, there is an important difference between administration and liquidation (winding up). Administration is intended as a company rescue procedure to try to help to restructure a still viable company and save at least some jobs (even if this ends up providing impossible). By contrast, liquidation is for terminal cases, where there is no hope of saving the business, with the unavoidable loss of jobs.

The first 14 days of any administration can be crucial. Administrators have a 14-day window to decide whether to “adopt” the employment contracts of staff caught up in a business collapse. Multiple redundancies are often made in this initial 14-day period. Employees who manage to keep their jobs beyond the first 14 days stand a better chance of recovering unpaid wages over the statutory minimum paid by the government’s Redundancy Payments Office in an insolvency (see below), that is, assuming there is anything left for creditors. And if their part of the business is successfully sold, they should transfer to the new employer under TUPE (see Chapter 12).

A new ruling obtained by general union Unite has established that administrators during the Coronavirus pandemic can access the government’s furlough scheme to retain employees on furlough instead of making them redundant immediately (Re Carluccio’s Limited (in administration) [2020] EWHC 886).