Keeping employees supported during a company collapse
Different types of insolvency
- Company voluntary arrangements (CVAs) – This has become a fairly common form of insolvency in the retail sector and allows businesses to continue trading while property rents and other debts are renegotiated. As a result, they often have little impact on employees, who can keep working.
- Compulsory liquidation – This is the process Thomas Cook has undertaken and involves the complete shutdown of the business following a winding-up petition by unhappy creditors. Once appointed, the liquidators have 14 days to decide whether to take on the employees’ contracts or terminate them.
To lessen the personal financial impact of a collapse, workers must check their contract to see what they can claim for, such as unpaid wages, notice pay and breaches of contract.
However, employees should keep in mind that there is likely to be a considerable delay between making a claim and receiving payment. Getting hopes up too high however is risky, as in some cases, the full amount of pay isn’t awarded. However, should a contract have been terminated due to a formal insolvency procedure, there is the option of claiming money through the National Insurance Fund. This could lead to a quicker payment.
Although a stressful process, employees need to maintain clear communication with insolvency practitioners and respond to any correspondence as soon as possible. Once a workforce helpline has been set up, employees should use this to their advantage. The most important things for individuals to do is find out as much information as they can about the process and review their contract. This can help them to claim the maximum amount that they’re entitled to, while reducing any impact of personal finances.