A laser focus on the finances of a business in administration is vital – but what about your obligations to employees?
When you decide to keep a business in administration trading, cashflow, costs and other financial issues are – for obvious reasons – front of mind. But we’ve found that this focus on the finances sometimes mean IPs lose track of their obligations in relation to employees. And this can lead to problems further down the line.
The 5 most important employee issues when trading in administration are:
IPs are generally aware of the need to consult with the employees about potential redundancies pre-insolvency. Often, the responsibility for this will fall on the company directors. However, when trading (sometimes for months), it’s easy for thoughts of redundancy consultation to disappear off the radar. If later a decision is made to make people redundant and no consultation has been done, a tribunal case could be just around the corner.
We advise the IP to consider advising employees that their roles are “at risk” of redundancy and within a consultation period. There’s no maximum duration for a consultation period.
During the trading period, employees continue to accrue holidays at the rate agreed in their contract of employment. If you make people redundant, you should include any amounts they are owed for these post-appointment holiday days in their final pay.
Non-adoption of contract letters are a formality but a vital one. Make sure you get your standard letter out to all employees within 14 days of appointment to confirm that you are not adopting employees’ contracts personally.
When running a payroll, the same pension entitlement regulations apply in administration as they did before the insolvency. The IP trading the company must be aware of the requirements and run the payroll accordingly. Don’t make the payroll person redundant too early on!
In TUPE cases, employee consultation is often left to the purchaser/NEWCO. Still, it’s worth remembering that it is a legal requirement to consult employees involved in TUPE transfers. Non-consultation claims may well be dismissed (where jobs are saved, and the employees suffered no loss, how sympathetic will the tribunal be?). But there’s no guarantee that this would be the case.
With expert guidance and hands-on-help from our ERA specialists, you can be sure you’re covering all the bases.
