Staff Redundancy

How employees are treated in the liquidation process.

When a company enters into liquidation, it is essential to keep the channels of communication so employees understand their entitlements and can plan for their immediate future.

As part of the liquidation process – all assets are disposed to repay creditors and to meet other financial obligations.

There is an order of priority to how money raise from liquidation is distributed, which is a follows.

1. Liquidator fees and expenses
2. Secured creditors with a fixed charge
3. Preferential creditors
4. Secured creditors with a floating charge
5. Unsecured creditors
6. Connected unsecured creditors
7. Shareholders

Employees are considered to Preferential Creditors.

As preferential creditors, employees would be entitled to unpaid wages (including commission and bonuses, notice pay, holiday pay) and redundancy pay.

The value of redundancy and other payments are as per contracts of employment; or in the absence of such clauses, as per statutory rates, which are legal minimums.

Contractors and Consultants without a continuous contract of employment are treated as unsecured creditors.

Employees would need to claim from the liquidator; before often there is not enough money remaining in the business for pay everyone their full entitlement; and employees may get nothing.

In such cases, employees can claim for monies owes from the National Insurance Fund for wages owed and redundancy at the statutory rates.

Statutory redundancy rights and entitlements

To qualify for redundancy pay from the National Insurance Fund, employees must have worked continuously under a contract of employment for the company for at least two years. The value of entitlement is defined by weekly wage and length of employment while at certain age bands.