Transfers of insolvent businesses - employee rights

If you are working with a business firm in UK which goes bankrupt, your life can become difficult if you don’t know how to protect your interests. When your employers are declared insolvent, their business ownership will be transferred to another company. When another company takes over your employer’s business, your employment rights may be neglected and thus you need to remain informed to protect your rights. However, the viability of your employment rights will depend on the kind of insolvency proceedings that your previous employer would be subjected to. There are several types of the protections that you can be offered during different types of insolvency transfers.

Employment protection rights during an employer’s insolvency

Not in all types of business transfers or takeovers, your employment rights are protected. If your employers are gone insolvent and are trying to close their business, it would be difficult for you to protect your employment rights. Your employers will decide to sell their assets and distribute the realised amount among their creditors and in such a case, probably there won’t be any employment rights available to you. In such types of insolvency, bankruptcy or liquidation procedure is followed normally.

But in cases where your insolvent employers try to save their business, you may enjoy the protection of your employment rights during the business transfer or takeover. In such type of insolvency, a voluntary arrangement can be organised with the creditors.

What happens to your money pending with your employers?

It’s possible that your employers went insolvent and they owed some money to you. But when an insolvency proceeding takes place and the business ownership is transferred to a new employer, the responsibility of paying you the pending amount might not be transferred to the new employer. In such a case, it will be difficult for you to recover your full amount when your employers are transferred.

You can only claim those amounts with your new employers which have been left after you get funds from the National Insurance Fund. You can claim a partial payment out of it from the National Insurance Fund which may include your salary and holiday payments that you have not been paid. Your claims against payments for redundancy or notice period will be rejected, as you haven’t lost the job. Only your employer has been changed.

Your employment terms and conditions

Your employment terms and conditions remain unchanged if it’s a normal business transfer or a take over by some new employers. The transfer of business does not affect the terms and conditions that you had with your original employer. However, if the transfer is being executed following insolvency, it may affect your employment terms and conditions. Your new employer could bring any or several changes in your employment terms and conditions once the transfer is completed. Your new employer can even reduce your salary after the transfer.

The changes in your employment terms and conditions are made with an objective of allowing the new employer to handle the responsibility of the transferring workforce. By bringing some minor changes, the new employer and the insolvency practitioner try to save the jobs of the people already employed with the transferring business. This means if the transfer is not a normal one, you may witness a salary cut under your new employer after the transfer or the take over is incorporated.

Whatever changes the new employers try to bring in the employment terms and conditions must convey to the employee representatives before hand. The employee representatives must give their consent in favour of the changes so that changes could be implemented.

If a trade union exists in your workplace

If in your workplace, there is an independent trade union, this trade union will be recognised as the employee representatives. This trade union will be responsible for the collective bargaining intending to retain maximum benefits of the employees. The changes suggested in the employment terms and conditions by the new employer and the insolvency practitioner must be agreed upon by the trade union. All these three parties enter into an agreement where the changes in the employment terms and conditions are decided mutually.

If there is no trade union

If there is no recognised trade union in your workplace, no employee representatives take part in the changing process in the employment terms and conditions. When changes are incorporated without any employee representatives, following cares need to be taken:
The suggested changes should be in writing.
New employers should hand over copies of the changes to each of the employees who might be affected by these changes.
The changes should be signed by the non-union representatives.

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