Transferring staff to a new business: Will TUPE apply?
Does liquidation always mean redundancy? In many cases liquidation does mean that a company’s employees are made redundant. However, in some cases staff can be ‘transferred’ to a new business.
If the current management or an unrelated party buys a substantial part, or the whole of the business of the liquidated company, employees’ jobs can be transferred to the new company, or the employees can be made redundant and make a claim against the government’s national insurance fund.
If staff are transferred prior to liquidation taking affect, under current legislation (called the ‘Transfer of Undertakings’ or ‘TUPE’ rules), employment will continue as before, with employees’ contractual rights protected, and the new employer being liable for most historic and present employee liabilities. This means that when staff have been transferred from a liquidated company to a new business, employee rights to holiday pay, redundancy and other contractual benefits will transfer with them.
However, if a company enters liquidation first, and its assets are sold by the liquidator, the purchasing company may take on the liquidated company’s staff without picking up their liabilities. This also enables the employees to make claims for unpaid wages, holiday pay, redundancy and notice period (if any) from the national insurance fund.
Obviously, for all parties concerned, its important to get proper advice before proceeding.
How much notice should I give my staff?
Ideally, you should look to give as much notice as possible. However, every situation really needs to be judged on its own merits. For example, if notice which could potentially jeopardise the sale of the business is given too early, this may ultimately mean that jobs are lost that could have been saved.
Where insolvency is imminent, notice to staff should be viewed in the overall context of the insolvency strategy, and as such should be decided only after taking expert advice. We will work with you to ensure that the best overall balance is provided between your obligations, and your employees’ needs.
My company is insolvent. Should I make the staff redundant myself?
Dealing with redundancies can be a legal minefield, even more so if the company is soon to enter liquidation. The best way to ensure everything is handled correctly is to get in touch with one of our business rescue experts.
If you choose to instruct us, we will agree with you the most suitable way of informing your staff of redundancies and we will take the time to properly explain the situation to them.
Where it is appropriate to do so we can attend the business premises, along with Job Centre representatives to ensure staff receive the best possible advice not just on the liquidation, but also on benefit claims and future job & retraining opportunities.
If staff have already been made redundant, you can direct them to our guide for employees made redundant in liquidations.
Have we answered all your questions about redundancy in liquidation? If we have missed anything, please get in touch with one of our business rescue experts directly.