If your company is facing insolvency or bankruptcy, it can be a very stressful time. It’s crucial to make certain that you have all the facts and that you know your rights and the rights of your employees.
Whether your staff have been working for you for a substantial period of time or have recently joined the business, it’s logical that you may be concerned for their futures – whether with the business or outside of it, in new roles.
Firstly, it may be reassuring to know that there are special arrangements in place for employees who are discharged from their jobs as a result of their employer’s insolvency. Your company has several options if it is insolvent and cannot pay its debts. Some of these include:
- Making employees redundant
- Asking employees to keep working as normal while the company rebuilds
- Negotiate reduced working hours, whilst attempting to restructure the business
- Transferring employees to a new employer if the business is sold
What is insolvency?
A Company is insolvent when it is unable pay its debts as and when they fall due. There are several types of insolvencies, including administration, liquidation and bankruptcy, Company Voluntary Arrangement (CVA)and Individual Voluntary Arrangement (IVA).
Not all types of insolvency mean that the business must close. For example, with a CVA the company can be rescued and restructured to enable it to survive.
Can my employees find out if my business is insolvent?
It’s possible to find out if a business is insolvent on the www.insolvency.gov.uk website. This information is free to access online. The Companies House website also provides information on insolvencies but this usually after the event www.gov.uk . It can provide information about your business, the directors, insolvency information and your employees will be able to search for this data by entering the name of their employer, or the company number.
As this information is so easily accessible, it’s important to notify your employees as soon as the information comes into the public domain. Being open and honest is the best way to deal with your employees’ worries.
What are my employees’ rights?
If your employees lose their jobs because of the company’s insolvency, they can make a claim to the government for several payments. This information is also available at www.gov.uk .
Your employees may also be eligible for Jobseekers’ Allowance if they lose their jobs. The longer an employee has been employed by the business, the more they are entitled to.
This is dependent on each employees’ situation but usually includes:
- Redundancy payments – based on age and the number of complete years that they were employed at the company.
- Unpaid holiday pay – In most cases, this is 20 days. Any holidays taken during the year will be deducted from the claim. In some cases, the employees can carry forward 5 days from the previous holiday year.
- Outstanding payments such as wages, overtime and commission
- And pay in lieu of notice – statutory notice pay is based on the employees’ contract of employment. You should give your employees advanced warning if the business is closing. If the company closes without warning, then employees will be entitled to notice pay.
Next Steps
If you want to find out anything further about this topic then please feel free to call on 0330 236 9930, 0330 236 9938 or 07961 116321. All conversations will be in strict confidence. You can also email vee@navigatebr.com.
This article is for information and interest only. It is not a substitute for full professional advice, which will take in to account the specific and individual circumstances. Navigate Business Recovery Limited cannot accept any responsibility for any loss arising as a result of any person or organisation acting or refraining from acting on any information.
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