Your rights if your employer is insolvent
If your employer is ‘insolvent’ this means it can’t pay its debts. You have rights if this happens and can make a claim for money you’re owed.
Types of insolvency
If you work for a company that’s insolvent, this means one of the following:
- administration - where your employer asks an ‘administrator’ to come in to try to keep the company going
- liquidation - when a company is closed and its assets are sold to pay the people it owes money to (creditors)
- receivership - like liquidation but it’s usually arranged by a single creditor that’s lent money securely (eg a bank), and the assets are sold to pay just that creditor
- voluntary arrangement with creditors
If your employer’s an individual, insolvency is called either:
- bankruptcy (‘sequestration’ in Scotland)
- voluntary arrangement with creditors (‘deed of trust’ in Scotland)
The person who deals with the insolvency is called the ‘insolvency practitioner’.
If you’re owed money, you can claim for it through the insolvency practitioner.
If you’re asked to keep working
The business might keep running if there’s a chance it can be rescued or sold. If this happens, you might be asked to continue working.
This doesn’t affect your rights to redundancy pay if the business closes down later.
If the business is sold to someone else, your employment rights are protected, including any pay that’s owed to you.