When a business runs in to financial difficulties it can be a stressful time for not only the business owners but also the employees.
The first whispers of hardship will generally cause unrest and a company should prioritise opening up lines of communication to quell any exaggerated rumours and to start managing their employees’ expectations. As an employee you will primarily want to know if your job is at risk and whether you will continue to be paid.
Should the worst happen, and your employer becomes insolvent, all is not lost. The Redundancy Payment Service can assist you in recovering statutory notice pay, contractual holiday entitlement, statutory redundancy payments and unpaid wages. These are subject to eligibility, statutory caps and maximum limits but payments can be made quickly, and this route is often the first stop for employees who are owed money.
Further claims for wages and holiday pay that an employee has not been able to recover through the Redundancy Payment Service will be prioritised when distributing any remaining monies but other claims for monies owed including commission, bonuses, and any tribunal awards will be listed alongside other general creditors.
An option could be that the Company continues trading but makes redundancies or decides to restructure. In these circumstances we would also expect proper procedures to be followed and consultations to take place with existing employees. Should fair and reasonable procedures not be followed, or the employer fails to pay wages on time or at all, the employment tribunal will remain a valid course of redress. As employment tribunal claims are free to issue, you have nothing to lose in pursuing a claim, but you should bear in mind that a judgment for monies owed will not guarantee payment.
A more complex situation can arise if the company is bought by another business. The exact circumstances of the sale or transfer will need to be considered but it is highly likely that the Transfer of Undertakings (Protection of Employees) Regulations 2006 (TUPE) will apply. If this is the case, your employment will transfer to the new employer and your existing terms and conditions will be preserved. This includes your current rate of pay, hours, shift patterns and length of service. Should the new employer wish to make any changes they will need to go through a thorough consultation process with all effected employees.