I Need to Liquidate my Company

What will happen to my staff?

With more and more businesses struggling to stay afloat in the current uncertain climate, this is not just a concern for small to medium sized businesses, evident from the recent collapse of tour operator Thomas Cook which hit headlines recently and headed into liquidation.

As a result, thousands of employees, including pilots, cabin crew or travel agency roles lost their jobs. Many employees remain unsure about what this means for them and whether they will get paid.

The collapse of Thomas Cook left thousands of employees around the country in a very unfortunate position. Thomas Cook employees will generally receive some protection, but it’s likely the vast majority will be out of pocket.

If a business goes into liquidation, employees are dismissed due to redundancy. An insolvent employer may not necessarily be absolved of the necessity to consult before dismissal notices are sent out. Failure to consult may render the dismissal unfair. If an employer is uncertain whether to or how to consult, expert advice should be taken.

Any employee who has two years’ service or more will qualify for a statutory redundancy payment, meaning the Government will generally pay their statutory redundancy pay from the National Insurance Fund. The amount of redundancy pay employees are entitled to, depends on factors including their age, how long they have worked for and their salary.

Fortunately for employees, they can also claim a number of other payments from the Government. This includes up to eight weeks’ unpaid arrears of pay, subject to a limit on a week’s pay being £525 per week. Employees can also claim up to six weeks outstanding accrued holiday pay, calculated up to the termination of employment. Again, this is paid subject to a maximum statutory limit on a week’s pay, less tax and national insurance contributions.

Notice pay is also available to employees where there is no money left in the business left to pay them however this is statutory notice pay only so anything that an employee may have been entitled to over and above this in accordance with their contracts of employment will be forfeited.

However, the general rule in respect of the above payments is not clear cut.  For any business that is unsure as to its obligations to consulting with its staff and paying out from what is left of the business, professional advice should be sought at the earliest opportunity.

This article is our Ask the Expert feature from the Winter issue of our quarterly client magazine PeopleTalk.

Fiona Mendel is our HR Operations Manager and as a qualified employment solicitor, she ensures that our team are on top of all the case law, best practice and legal changes taking place in the world of HR.

Leave a Reply