Company liquidation what are the employees’ rights?
Debbie Cockerton explains what claims employees have in the event a company liquidation
The subject of insolvency is currently in everyone’s homes with the news that retail giant British Homes Stores (BHS) has entered into administration.
While the majority of the reports will include how much money has been lost, the extent of trading while insolvent or the conduct of the directors and shareholders, the issue which we will be focusing on in this article is the loss of jobs for 350 of the staff.
When the directors of a company decide that they will be placing their company into liquidation the first thought for many is what will happen to the staff. At DCABR we always offer to attend the business premises with the directors to speak with the staff to ensure that they are fully aware of their rights and what will be happening to the company.
The staff will be wondering what they will do, whether they will be paid and ultimately how will they pay their own personal bills. The case administrator at DCABR will always speak to staff to alleviate any concerns that they have.
The procedure for employees to claim against the company for wages, etc., has now changed and is now commenced online via the Redundancy Payments Office (RPO). The liquidator will apply for a case reference number and supply this to staff with a letter to confirm their redundancy.
Once the staff have this number they complete a simple form which is emailed to the RPO and also to the Liquidator, so that further forms can be submitted by the liquidator and the claim commenced.
However claims cannot be accepted formally by the RPO until the company has entered into liquidation and this can delay employee’s claims when the directors aren’t able to liquidate for some time.
We usually advise that it could be up to six weeks from the date of liquidation for employees to be paid the monies due to them. However, this is a worst-case scenario and most claims are paid within two to three weeks.
What can employees claim?
The payments are made by the Redundancy Payments Office (RPO), who in turn will then make a claim against the company; therefore it is not essential that the company has money to pay the claims.
Employees can claim for:
1. Arrears of pay – up to a maximum of eight weeks
2. Pay in lieu of notice
3. Holiday pay – up to a maximum of six weeks during the last 12 months preceding the relevant date.
4. Redundancy pay
5. Occupational or personal pension scheme contributions
Directors as employees
Many directors also question as to whether they can claim via the RPO and the short answer is yes!
When the advert for the liquidation is placed in the Gazette the directors will receive several letters from companies offering to assist with their redundancy claims for a small fee; this fee is calculated as a percentage based on the final claim.
However, at DCABR we will assist the employees and the directors with their claim just as these companies do, but we will not charge a fee for this and this is included in the liquidation process.
Generally, the directors will need a contract of employment for their claim to be accepted; however, each case is different and there are other factors which must be considered.
To discuss this further please contact Debbie Cockerton on 01702 344558, or email [email protected] or take advantage of our UK Recovery Helpline, which operates seven days a week (8am to 8pm) on 0800 066 2544.
• Debbie Cockerton is a partner at DCA Business Recovery
This article is taken from “Accounting Practice” the ICPA quarterly magazine. Dedicated to supporting and promoting the needs of the general practitioner. You can find us at www.icpa.org.uk or email [email protected] or by phone on 0800-074-2896