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30 August 2011

Employee rights after Liquidation


Many employees who lose their jobs as a result of a liquidation will have claims for unpaid arrears of salary, holiday pay, notice pay, statutory redundancy pay and – if the liquidator does not follow the correct process – unfair dismissal. However, the extent to which an employee can recover these sums is limited.


One course of action is to submit written details of your claims to the liquidator. Certain liabilities will rank as preferential debts (including arrears of salary up to £800 and accrued holiday pay). These will be paid in full, in priority to many other debts. Other sums, including notice pay and unfair dismissal compensation, qualify as unsecured debts and are much more difficult to recover.


Another course of Action is to the government’s national insurance fund, which guarantees certain debts including part of your statutory notice pay and statutory redundancy pay, but not other debts such as unfair dismissal compensation.


Finally, it is possible to pursue a formal claim against your employer in an employment tribunal, but this can be expensive and the judgement will be difficult to enforce against an insolvent employer. So there is usually little to be gained by doing so.


In summary, it is certainly worth submitting details of your claims to the liquidator and to the national insurance fund, but you should be aware that you may only recover a limited amount of what you are owed. Your time and money may be better spent focusing on getting a new role.


Source: FT 27.08.2011


*Article for guidance only. Professional advice should be obtained to ensure that all circumstances are assessed in providing a complete answer.