The effect of Pre Pack Liquidation on employees depends on whether they are required by the new company. All employees have to be transferred. However there may still be job losses.
- Will Pre Pack Liquidation put jobs at risk?
- What rights do employees have in Pre Pack Liquidation?
Pre Pack Liquidation and Employees
Company Debt Expert James Falla discusses the affect of a Pre-pack Administration on the company's employees. For more business debt advice visit www.companydebtadvice.net
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Will Employees be retained in Pre Pack Liquidation?
Pre Pack Liquidation involves setting up a new company to trade in place of the old. Given this it stands to reason that the old company employees will still be required in the new business. However it does not always work like this.
The Pre Pack solution is being implemented because the old company was not trading profitably. To overcome this situation the structure of the new company will often have to be changed. It may be that certain departments have to be downsized or closed altogether. Inevitably this will involve employee redundancies.
Clearly the loss of any jobs as a result of Pre Pack Liquidation is undesirable and potentially devastating for those involved. However if a profitable company can emerge this will protect some jobs. It will also create the opportunity to employ more people in the future.
What rights do Employees have in Pre Pack Liquidation?
The rights of employees during Pre Pack Liquidation are governed by TUPE (Transfer of Undertakings – Protection of Employment). This means that all the old company employees must be transferred to the new under the same employment terms and conditions.
If the new company no longer needs the services of any of the old employees it can make them redundant. However the redundancy process must take into account all the rights that they accumulated within the old company including holiday entitlement and length of service.
Because all employees and their rights must be transferred to the new company Pre Pack Liquidation cannot be used to avoid an expensive redundancy programme. If employees are made redundant without taking into account their full employment rights they may have grounds to take action against the new company for unfair dismissal.