Company in administration

Waxy666

Galloglass said:

I suspect this issue will come up a lot in the next few months or so. The question for employees (of companies in Administration) are how long should they stick it out? As I understand the IP side of it, only £800 of unpaid wages are covered as a creditor, so it begs the question how long should an employee stick with a company in Administration?

If the key staff were to leave after the £800 limit is reached, then there may not be a business to sell. Assets yes but not necessarily a business. So an IP would have to make a quick judgement on who to keep paying and who to let go and if there is a business going forward. I suppose that is what pre-packs are all about. 

On the employee side it will pay to get an idea from the Administrator very early on about individual circumstances and for the employee to make a quick decision, if they can.

This isn't quite right.  IPs get a couple of weeks after appointment to make a decision on redundancy, after that any work you do during the insolvency they have a legal duty to pay you - so if you keep working for the company, you will keep getting paid as normal for the time you work.  Sometime you will even be offered a retention bonus or a special deal to sweeten it if you agree to stay and help for a period of time.  Some insolvencies last for months or years and keep trading, staff are paid throughout the entire time as normal.

For amounts owed at the date of insolvency (inc. notice pay, arrears of wages, redundancy pay etc) you would be a creditor - but importantly the Redundancy Payment Service steps in to support employees and pays out to them direct subject to certain caps https://www.gov.uk/your-rights-if-your-employer-is-insolvent/what-you-can-get.  The £800 cap you reference is part of the preferential claim element - but since the RPS will pay you out and take over your claim it's not particularly relevant for an employee to be concerned about.  Anything you are owed and don't get from the RPS would be an unsecured claim.

Waxy666

KWhite444 said:

Hi
the company I have worked for has gone into administration, so all staff have had to reapply for furlough. However, after 3 weeks have still no payment or clear communication when we will receive it but are expected to go back to work full time this week to liquidise the stock. What are my rights? 

Speak to the administrator (or their staff).  It's likely the company has very little cash available, so they will probably only be able to pass on furlough money to you as and when they get it from HMRC.
If they are asking you to come back in and do work (i.e. bringing you back off furlough) then they have a legal duty to pay you for the work you do.  The fact the company is in insolvency doesn't effect their legal duty to pay you for work down post-appointment if they have asked you to continue working for them.  They should have communicated this to you.

Thrugelmir

Galloglass said:

I suspect this issue will come up a lot in the next few months or so. The question for employees (of companies in Administration) are how long should they stick it out? As I understand the IP side of it, only £800 of unpaid wages are covered as a creditor, so it begs the question how long should an employee stick with a company in Administration?

If the key staff were to leave after the £800 limit is reached, then there may not be a business to sell. Assets yes but not necessarily a business. So an IP would have to make a quick judgement on who to keep paying and who to let go and if there is a business going forward. I suppose that is what pre-packs are all about. 

On the employee side it will pay to get an idea from the Administrator very early on about individual circumstances and for the employee to make a quick decision, if they can.

Without key employees the IP cannot perform their function. The business may well not be sold on but ultimately wound up. Many variables to be considered. 

Galloglass

Without key employees the IP cannot perform their function. The business may well not be sold on but ultimately wound up. Many variables to be considered. 

I was trying to answer the original question from an employee's point of view. Clearly the IP (insured) has more leeway to act than an employee (little or no insurance) in deciding what to do.

This isn't quite right.  IPs get a couple of weeks after appointment to make a decision on redundancy, after that any work you do during the insolvency they have a legal duty to pay you - so if you keep working for the company, you will keep getting paid as normal for the time you work.

Thanks. A useful clarification for those that might be facing the choice to stay or go when the Administrator appears at the door.

Thrugelmir

The Redundancy Payments Office guarantees the employees rights once a Company enters into a formal insolvency process. This can also include an element of arrears. Employees being entitled to due notice etc.