What Happens to Staff When a Company Appoints Administrators?
A recent Business Desk update reported that Famously Proper, owner of burger company Byron, has filed a notice of intention to appoint administrators.
When such notices are filed and administrators are appointed, we often receive calls from employees asking what it means for them. We’re often asked questions such as when will I be made redundant? Am I entitled to notice? Will I be paid my wages? Will I get redundancy pay?
If a company secures a rescue deal in these sorts of circumstances, then it can mean business as usual and employees continue to work, but simply under new management. However, if a rescue deal can’t be secured or the rescue deal is subject to streamlining the business being purchased, then sadly these situations can result in redundancies
If redundancies are looking likely, any company (whether insolvent or not) must follow the legal process of consultation with its staff and keep them informed of all developments. If more than 20 redundancies are proposed at each work location, then the company will be under a legal duty to inform and consult, either with recognised trade union representatives or with elected employee representatives.
The consultation period should last for at least 30 days before anyone loses their job. If redundancies are made without such a process of information and consultation then employees have a right to pursue what is called a protective award claim, which could see the company being ordered by an Employment Tribunal to pay a penalty of up to 90 days’ pay per redundant employee.
If the company concerned is insolvent, then up to 8 weeks of the protective award compensation can be claimed from the national insurance fund, as it is considered to be arrears of pay. If the company has paid redundant staff all outstanding salary, this means an individual could be entitled to up to a further £4,568 gross.
A protective award claim is therefore a good way of clawing back some of the financial losses suffered and securing compensation for redundancy without warning.
Whatever the situation might be, we’d always recommend that employees seek legal advice at an early stage. With the rising cost of living, job security is so important and we can advise employees what they can do to try and protect their positions, their jobs and if all else fails, help secure compensation when things go wrong.
Author: Daniel Kindell, Head of Employment
