What happens to employees when a company becomes insolvent?
Employees may be made redundant, continue working or transfer with a business sale, depending on the procedure and outcome. Eligible employees can claim certain unpaid amounts through the government scheme, subject to limits. Directors should plan communication and payroll records early rather than promise that every job or payment is protected.
Business Insolvency Helpline • Checked 1 November 2026
General guidance, with procedural detail focused on England and Wales. Rules and routes can differ in Scotland and Northern Ireland.
What can employees claim?
Potential claims include statutory redundancy, eligible unpaid wages, holiday and statutory notice pay. Entitlement depends on employment status, service and the circumstances. Statutory caps apply, so a claim may not cover the full contractual amount.
The official guidance checked for this article gives a weekly cap of £751 for relevant redundancies from 6 April 2026. Different payment types have different limits and deductions; use the current government guidance when calculating an individual claim.
Does TUPE apply to a sale?
A rescue transfer can bring TUPE protections into play. The type and timing of insolvency affect employment rights and which liabilities pass. A closure liquidation is different from a rescue administration, so do not assume identical treatment in both cases.
Involve the insolvency practitioner and employment adviser before telling staff that employment will transfer or terms will change.
What should the employer organise?
- Accurate service dates, contracts, payroll and holiday records.
- A clear explanation of what is known and what is undecided.
- Advice about consultation and notification duties.
- Details of the office-holder and claim process when available.
If wages cannot be paid, discuss the position before asking staff to work further shifts. Pension contributions also need checking; give the office-holder details of unpaid contributions and the scheme.
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Related questions
No. Some businesses keep trading or are sold. The administrator’s plan and available funding determine what is possible.
No. Eligibility, weekly caps and maximum periods apply. Uncovered amounts may remain claims in the insolvency.
Take advice promptly about what to communicate and when. Insolvency does not remove consultation or other employment obligations.
Sources checked for this guide
- Overview (www.gov.uk)
- What you can get (www.gov.uk)
- Tupe transfers if your employer is insolvent (www.acas.org.uk)
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