17 September 2023 , 06:00
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One of the things I’ve found most stressful over my working life is the threat of redundancy.
Being made redundant is something that is a possibility for everyone over time and many people will go through this process repeatedly over the years as the whole concept of a "job for life" vanishes. The fact that you can suddenly be left without your main source of income can be exceptionally distressing, particularly at this time in our lives when the cost-of-living crisis is already putting our finances under considerable stress.
It’s been reported that around 12,500 people work for Wilko, which has around 400 shops in the UK. It now looks increasingly likely that for many of those people, their jobs are on the line. It must be incredibly upsetting to have spent the last few weeks checking the news nervously, to see if your company is going to be rescued or bailed out – or to find out if your store is one earmarked for closure.
If you find yourself in this position, or you’re worried about your rights if your employer is struggling, then here’s my guide.
What happens when a business goes bust?
Going bust. Entering liquidation. Experiencing insolvency. We have a range of ways to describe what happens when a business goes under. In fact, businesses can continue to trade long enough to be taken over or find last-minute backers. Other times, businesses simply collapse quickly and with little fanfare.
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A company is considered to be "insolvent" if it can’t pay its bills. There are two main terms used to describe what happens next – liquidation and administration. Liquidation is where a business is formally shut down and its assets are "liquidated" - a posh way of saying "sold off". This happens when there’s no chance of a bail out and the business can’t be saved. Or alternatively, if the owners of the company just want to shut down the business.
Administration is where there’s a possibility of a business getting funding or continuing to trade in some form, which usually involves being rescued or purchased. Once placed in administration, the administrator steps in and comes up with plans to keep the company running while assessing the options. This means that the business is continuing to operate, albeit in a limited form.
If a business is bought outright or in part, then employees are often transferred over – but there may be the dreaded restructuring process afterwards as the new owners attempt to make the business profitable.
What about my wages?
By far the biggest worry for people when their employer collapses is what happens to the wages you’re owed. And what about holidays you haven’t taken? Or benefits in kind?
There’s good news here (of sorts) but it’s by no means straightforward. You’ll have to put a bit of work in to claim for lost money. You’ll need to have been employed continuously for two years though and other factors – like your age – apply too.
You’ll need to contact the Redundancy Payments Service in order to claim for lost wages. Take a deep breath though. Because they need quite a bit of information. According to their website, this includes:
a CN (case reference) number – you get this from the company sorting out the insolvency (the insolvency practitioner).
- Your National Insurance number
- An email address
- Your bank or building society details (so you can get paid)
- The date you became redundant (if you lost your job) - this can be found on your official letter of redundancy
- Your employment details, including dates you were employed and how much you were paid
- Details of any money you’re owed by your employer
- The number of holiday days you’re entitled to and holiday days you’ve taken
- Copies of any letters sent to or received from your employer or an employment tribunal
- Details of any money you still owe your employer
As with everything of an official nature, there are lots of rules, caveats and exceptions. But as a general rule, you can claim for:
- Up to eight weeks of pay
- Annual leave payments, including holidays you’ve earned
- Statutory payments that haven’t been paid, like maternity or sick leave
It can take up to six weeks for the money to come through, though I have heard some reports of further delays. It makes sense to get as much information as you can for your application up front to prevent further problems down the line.
Don’t get too excited though if you were on a decent wage. Payments are capped at a maximum of £643 a week. Oh and there’s an enormously complicated breakdown of other factors that make a difference in what you can claim too.
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What if my employer still owes me money after I’ve claimed from the Government?
You’ll need to speak to the insolvency practitioner and ask what is required to become a "creditor" – someone the former business owes money to. As you may have seen though in my recent guide to your shopping rights when a firm goes bust, you join the back of a very, very long queue and it’s often hard to get even a couple of quid back from the firm.
For benefits in kind – things like pensions, health insurance and other benefits you’ve received from the firm, it all depends on what they are. Pensions should be safe. Find out more from Money Helper here.
Things like health insurance are technically provided by an external provider, though you’ll probably be part of a group policy with your colleagues. Give the insurer – or any other provider of third party services – and ask them if you can keep the policy going and what your options are.
How do I know if my employer is insolvent?
It’s not always easy to know the insolvency status of your employer. Big businesses like Wilko are more likely to have an insolvency process which will at least tell you what is going on. But smaller businesses might be hiding their circumstances until it’s too late. So first things first, check out the status of your company online first.
First of all, check your company’s legal name (this may be different from their trading name). This will usually be lurking in the small print on letters, websites any your personal tax account ( check out the latter here ).
Once you’ve found the right name you can check with Companies House to find out the insolvency status. If it hasn't been updated, you can get some updates sent to you if things change. Click on the " follow this company " option.
What happens next?
When you look up the business on the Companies House website, you’ll find a few different terms to describe the current position of the business
- Administration
- Receivership
- Liquidation
- Company Voluntary Arrangement
All of these mean the business is insolvent and you should therefore be able to find the contact details of the insolvency practitioner. Sometimes you might see that there’s "a proposal to strike the company off the register". If you see this, act fast.
The firm is trying to shut without going insolvent which means you won’t get any cash out of them. I see this a lot with cowboy builders and other questionable businesses. You need to file a report to say they owe you money. Here’s how to do it. Citizens Advice has a great guide with links that will talk you through every option of redundancy, from insolvent firms to being laid off.
If your employer is a sole trader or a partnership (super small, basically) then you’ll need to check the Individual Insolvency Register here. This will say if the firm is:
- Bankrupt
- Taken out an Individual Voluntary Arrangement (IVA)
As with other businesses, this means you can apply to the Redundancy Payments Scheme too.
One last thing
It’s easy to feel scared when a firm goes bust. But don’t panic. You can get help and advice from free services like Citizens Advice. But make sure you get as much information out of your HR department on your rights and entitlements too.
Stay calm and work together with your colleagues so everyone knows their rights. There will be people who will find information that could help you too. So keep the lines of communications open.
- Martyn James is a leading consumer rights campaigner, TV and radio broadcaster and journalist