Facing redundancy? Here’s a helpful guide.

Is your employer in administration or entering liquidation? Here's what you should do.

The threat of redundancy is unsettling, and this page briefly outlines what should happen, and what you can do.

“My employer has entered liquidation”

If the liquidation is compulsory, your employment will come to an end with immediate effect from the date of the ‘winding up’ order. As compulsory liquidation tends to occur when companies are in the worst possible financial position, this can put future salary payments in jeopardy. Legally, you could make a wrongful dismissal claim to be paid for your notice period, but this can be difficult to win. It is often better to make a claim to the National Insurance Fund, which provides financial protection in this situation. The fund will usually cover salary arrears up to a certain amount, statutory notice pay, unpaid pension contributions, and a statutory redundancy payment or equivalent.

If the liquidation is voluntary, your employment may not be affected immediately as the business can continue to trade to achieve a beneficial winding up. Practically speaking, employees are often let go shortly after the announcement. If you are not served with adequate notice or are not paid for your notice period, you can also make a claim to the employer or the National Insurance Fund.

“My employer is in administration”

Administration is different to liquidation in that an ‘administrator’ is appointed to try to rescue the company. Often, this means finding a buyer for it, which could simply mean your employment contract is transferred to the new company. However, it could also result in redundancy if your role is no longer required in the new business. If this happens, you will not be able to claim for unfair dismissal, but may be entitled to a payment from the National Insurance Fund.

“My employer has announced redundancies”

Organisations are legally obliged to warn employees as soon they are aware that redundancies are possible. Once notified, there is a ‘consultancy period’ that offers an opportunity for employees to understand the situation, and to put forward suggestions for avoiding it. If redundancies are unavoidable, the employer should provide further details, such as identifying the pool of employees from which redundancies will be made. If it ultimately turns out that you are one of them, you should be given a chance to discuss alternative vacancies but, if none are available, your employment will come to an end.

If this happens, you will be entitled to either work your notice period or be paid in lieu of it. If you have at least two years' continuous employment, you will also be entitled to a statutory redundancy payment based on your age, length of service and gross weekly pay. Currently, the maximum amount of statutory redundancy pay is £14,670, based on £489 per week for an employee that has worked for over 20 years.

This process is required for all employees, including any on maternity or long-term sick leave. Those on maternity leave should bear in mind that there is a legal requirement for employers to offer you suitable alternative employment in preference to other candidates, but this won’t prevent redundancy if no other suitable vacancies are available.

Need some advice?

If you are facing redundancy, or your employer is experiencing financial difficulties, we can advise you on your options.

© SA LAW 2018

Every care is taken in the preparation of our articles. However, no responsibility can be accepted to any person who acts on the basis of information contained in them alone. You are recommended to obtain specific advice in respect of individual cases.
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