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Insolvency and employee concerns

With Lloyd’s announcing its liquidation and Medipharmacy going into administration we provide some key considerations for employers when facing the possibility of Insolvency.

6 key points:

  1. Are employees to be made redundant, if so how many?

If 20 or more employees are to be made redundant at one establishment in a period 90 days or less the minimum period for notification and consultation are:

  • Between 20 to 99 redundancies at one establishment – at least 30 days before the first dismissal.
  • 100 or more employees at one establishment – at least 45 days before the first dismissal.

The employer will also need to notify the Secretary of State at least 30 or 45 days before the first dismissal is issued.

If its not reasonably practicable to comply with those time periods, then employers should make every effort to do so, as far as they are able, and will need to provide reasons as to why the information could not be provided on time.

  1. Fair dismissals

For employees with over 2 years service the employer should also follow a fair and reasonable process to avoid unfair dismissal claims.

  1. Does the company have the financial resources to fund the redundancy costs if the company is put into administration?

If so, relevant arrangements will need to be made for payment of wages and contractual payments at a time when cash resources may not be available.

If not, those affected could apply to the National Insurance Fund (NIF) for eligible payments including; arrears of pay, holiday pay, statutory notice pay, statutory redundancy pay, pension contributions and other guaranteed payments.

  1. Can the company be sold and the employees transferred to a Buyer?

If so, the employees could be TUPE transferred to the Buyer avoiding the need for redundancy payments to be made.

A Buyer may also agree to indemnify the cost of any claims associated to the TUPE transfer. This should be agreed during the sale/purchase process.

  1. Avoid ongoing dispute with employees

The most effective way to do this is to consult with all relevant employees, take the time to speak to them or their representatives.  This may reduce the possibility of employee disputes and damage to company reputation.

  1. Relevant terminology

A Pre-pack is where an insolvent company is sold as a going concern, of some or all of the business and assets of the company, so a sale can be completed after and Administrator has been appointed.

A Pheonix company is where an insolvent company is liquidated and the directors incorporate a new company and carry on business in the new company using the goodwill of the insolvent company.

Contact us

Robert Maddocks is highly experienced in advising on Pharmacy HR/ employment law related matters. Please do not hesitate to contact Robert Maddocks on the following contact details if you require assistance.

07585 308630

Please note this article should not be taken as constituting legal advice. We strongly encourage legal advice is taken on any individual circumstances.