The effect of a Pre Pack 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.
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 a Pre Pack?
A Pre Pack 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.
The loss of any jobs as a result of a Pre Pack is undesirable. However if a profitable company can emerge this will protect some if not all jobs for the future.
What rights do Employees have in Pre Pack?
The rights of employees during a Pre Pack 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.
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.
Because all employees and their rights must be transferred to the new company a Pre Pack cannot be used to avoid the costs of a redundancy programme.