What Happens to Your Job When a Company Goes Into Liquidation
When a company enters liquidation, the liquidator usually has to decide quickly whether the business can keep trading or must close immediately. In many cases, liquidation means immediate redundancy for employees, since the liquidator’s job is to wind down the company’s affairs, not run it as a going concern. In some liquidations, particularly where a buyer takes over parts of the business, some employees may transfer to the new owner under separate transfer rules, keeping their jobs with continuous service.
What You Are Legally Owed
If you lose your job because your employer becomes insolvent, you may be entitled to claim several types of payment:
- Unpaid wages, up to a set limit, for work you already did before the company became insolvent.
- Holiday pay, for holiday you accrued but had not yet taken.
- Statutory notice pay, if your employer did not give you the notice period you were entitled to.
- Statutory redundancy pay, if you had at least two years of continuous service.
These payments have their own separate rules and limits, and not everyone qualifies for every category, so check your specific entitlement based on your length of service and circumstances.
How to Claim: The Redundancy Payments Service
You do not claim these payments from the liquidator directly. Instead, you claim through the government’s Redundancy Payments Service, which pays eligible employees from the National Insurance Fund when an employer cannot pay. The liquidator or administrator should give you the information and forms you need to make this claim, usually shortly after the insolvency begins.
Time Limits for Claiming
You generally need to submit your claim within a set time limit after your job ends or the company becomes insolvent, whichever is more relevant to your situation. Missing this window can affect your ability to claim, so submit your application as soon as you receive the necessary paperwork from the liquidator, rather than waiting.
What if You Are Owed More Than the Statutory Limits
The statutory scheme has caps on what it pays for wages, holiday, and redundancy. If you are owed more than these limits, for example a larger contractual notice payment, you become an unsecured creditor for the remainder. This means you may eventually receive a portion of what you are owed from company assets, but only after secured and preferential creditors, and there is no guarantee you will receive anything at all, depending on how much money the liquidation recovers.
Frequently Asked Questions
Do I automatically lose my job if my employer goes into liquidation?
Not always, but it is common, especially in compulsory liquidation. Some employees keep their jobs if a buyer takes over parts of the business under transfer rules.
How do I claim unpaid wages if my employer is liquidated?
Claim through the Redundancy Payments Service, using the information and forms the liquidator provides. You do not claim directly from the company.
Is there a limit on how much I can claim?
Yes. Statutory limits apply to wages, holiday pay, notice pay, and redundancy pay. Amounts above these limits become unsecured claims against the company, which may or may not get paid depending on available funds.
What if I do not receive the paperwork from the liquidator?
Contact the Insolvency Service directly if you have not received information about how to claim within a reasonable time after losing your job.
Getting Legal Advice
If your employer has entered liquidation, our guide to winding up petitions explains how compulsory liquidation begins, and our wider guide to financial law covers the broader legal framework around company insolvency.
This article gives general information only. It does not constitute legal advice. Statutory limits and time frames change periodically, so always check current figures with the Insolvency Service or a qualified employment solicitor.